Public capital, endogenous growth, and endogenous fluctuations

Abstract Cazzavillan [Cazzavillan, G., 1996. Public spending, endogenous growth, and endogenous fluctuations. Journal of Economic Theory 71, 394–415] studies a discrete-time, one-sector endogenous growth model with a flow of publicly enjoyable goods and productive services financed through income taxation. He demonstrates how equilibrium paths are indeterminate, for a large range of the consumption externality of public spending. This study extends [Cazzavillan, 1996] by considering an otherwise identical production function, except with public capital stock as an input. The results support the robustness of multiple growth paths even in a one-sector growth model with public capital stock, and modify the set of the consumption externality of public spending, in determining growth dynamics in a similar model with non-accumulated public spending.