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Working Paper

Optimal Fiscal Policy, Public Capital, and the Productivity Slowdown

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This paper develops a quantitative theoretical model for the optimal provision of public capital. We show that the ratio of public to private capital in the U.S. economy from 1925 to 1992 evolves in a manner that is generally consistent with an optimal transition path derived from the model. The model is also used to quantify the conditions under which an increase in the stock of public capital is desirable and to investigate the effects of hypothetical nonoptimal fiscal policies on productivity growth.
09.01.1995ISSN 2573-7953 WP 95-09DOI 10.26509/frbc-wp-199509

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Cassou, Steven P., and Kevin Lansing. 1995. “Optimal Fiscal Policy, Public Capital, and the Productivity Slowdown.” Federal Reserve Bank of Cleveland, Working Paper No. 95-09. https://doi.org/10.26509/frbc-wp-199509