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Golden Rule (fiscal policy)

About: Golden Rule (fiscal policy) is a research topic. Over the lifetime, 661 publications have been published within this topic receiving 9789 citations.


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TL;DR: In this article, the history of the Golden Rule and selected interpretations are discussed, as well as the interpretations of the Rule of Thumbs Up and Thumbs Down in the Bible.
Abstract: This encyclopedia article discusses the history of the Golden Rule and selected interpretations.
Book ChapterDOI
01 Jan 2017
TL;DR: In this paper, the authors introduce a modified neoclassical growth model which includes a new bias of technological progress in a quasi-endogenous growth model in which part of labor is used in the research & development sector.
Abstract: The innovative approach presented introduces a modified neoclassical growth model which includes a new bias of technological progress in a quasi-endogenous growth model in which part of labor is used in the research & development sector. The combination of a macroeconomic production function and a new progress function, plus the assumption that the output elasticity of capital is positively influenced by the size of the R&D sector, sheds new light on innovation and growth as well as on income inequality: Thus, there is a new approach for explaining Piketty’s historical findings of a medium-term rise of the capital income share in industrialized countries—both in the earlier and later part of the nineteenth century and in 1990–2010 (this contribution has been published originally in the Journal International Economics and Economic Policy). A rising share of capital income can be explained within this approach by the increase in the output elasticity of capital, which has been developed in a new way, namely in the context of R&D. In the approach presented herein, the golden rule issues are also highlighted, and it is shown that choosing the right size of the R&D sector will bring about maximum sustainable per capita consumption. While the basic new model is presented for the case of a closed economy, one could easily accommodate both trade and foreign direct investment and thereby get a better understanding of complex international investment, trade, and FDI dynamics—including with respect to the envisaged Transatlantic Trade and Investment Partnership between the USA and the EU.
Posted Content
TL;DR: In this article, a working paper analyzes with cross-sectional data if the Golden Rule condition satisfies: where the saving index is equal to capital or to the real interest rate, equal to the gross output growth of households.
Abstract: This working paper analizes with cross-sectional data if the Golden Rule condition satisfies: where the saving index is equal to capital () or to the real interest rate, equal to the gross output growth of households.
Posted Content
TL;DR: In this paper, the authors extended the neoclassical model for economic growth to the general case of economic growth, which can be represented as the sum of cyclical and growth components.
Abstract: In this paper, the neoclassical model is extended for the general case of economic growth, which can be represented as the sum of cyclical and growth components. If the general formulation of the golden rule of capital accumulation is satisfied (the savings rate is equal to the capital income share), the production function takes the form of the Cobb-Douglas function. This function governs the economic growth both when the economy is growing along an equilibrium path and when the economy is departing from it (the correlation coefficient between U.S. GDP changes and calculated ones is equal to 0.91). When economy fluctuations are averaged along an equilibrium path, the Cobb-Douglas function reduces to condition, which is similar to Harrod-Domar one. The level of technology may be reasonably considered to express in terms of the wage level.
ReportDOI
TL;DR: In this paper, the authors study which policy or policy mix is more effective in achieving the socially optimal (golden rule) level of aggregate capital stock in an infinite-horizon heterogeneous-agents incomplete-markets economy where capital is over-accumulated for two distinct reasons: (i) precautionary savings and (ii) production externalities.
Abstract: The aggregate capital stock in a nation can be overaccumulated for many different reasons. This paper studies which policy or policy mix is more effective in achieving the socially optimal (golden rule) level of aggregate capital stock in an infinite-horizon heterogeneous-agents incomplete-markets economy where capital is over-accumulated for two distinct reasons: (i) precautionary savings and (ii) production externalities. By solving the Ramsey problem analytically along the entire transitional path, we show that public debt and capital taxation play very distinct roles in dealing with the overaccumulation problem. The Ramsey planner opts neither to use a capital tax to correct the overaccumulation problem if it is caused solely by precautionary saving---regardless of the feasibility of public debt---nor use debt (financed by consumption tax) to correct the overaccumulation problem if it is caused solely by pollution---regardless of the feasibility of a capital tax. The key is that the modified golden rule has two margins: an intratemporal margin pertaining to the marginal product of capital (MPK) and an intertemporal margin pertaining to the time discount rate. To achieve the MGR, the Ramsey planner needs to equate not only the private MPK with the social MPK but also the interest rate with the time discount rate---neither of which is equalized in a competitive equilibrium. Yet public debt and a capital tax are each effective only in calibrating one of the two margins, respectively, but not both.

Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20218
202024
201922
201821
201733
201626