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American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) >
2008 Annual Meeting, July 27-29, 2008, Orlando, Florida >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/6431
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| Title: | Analyzing Growth and Welfare Effects of Public Policies in Models of Endogenous Growth with Human Capital: Evidence from South Africa |
| Authors: | Badibanga, Thaddee Mutumba |
| Authors (Email): | Badibanga, Thaddee M (badi0012@umn.edu) |
| Keywords: | Fiscal Policy
Government Expenditures and Education
Growth Model |
| JEL Codes: | E62
H52
O41 |
| Issue Date: | 2008 |
| Series/Report no.: | Selected Poster
53707 |
| Abstract: | Since the abolition of its Apartheid regime in 1994, South Africa has launched a massive program of education, which has been financed through resources representing on average 21% of the national budget or 7% of GDP. Today, the GDP share of public spending on education is 1.3 times the average of industrialized countries (5.4%) and almost twice that of developing countries (3.9%). In this paper, we simulate fiscal policy experiments to analyze the growth and welfare effects of a shift in the allocation of government expenditures between public spending on education and
transfers as well as those of a change in the tax rate in a model of endogenous growth with human capital accumulation for the South African economy. The results of simulations demonstrate that a shift in the allocation of fiscal resources between educational spending and transfers does not affect the long run allocation decisions. In the transition, however, this shift generates a negative effect on the rate of growth of GDP. In fact, a reallocation of expenditures shifts resources away from saving
and toward consumption, and translate into lower rate of growth but higher welfare. Nonetheless, these growth and welfare effects are very small. On the other hand, a tax cut
generates growth effects in the long run as well as in transition. In fact, reducing or cutting the tax rate in the long run lowers the interest rate, which in turn creates
disincentives for saving and results in low rate of growth of GDP. However, in the transition, it reduces or removes distortions and translates into high work effort, high
accumulation of human capital, and thus high rate of growth of GDP. Nonetheless, its welfare effect is negative. |
| URI: | http://purl.umn.edu/6431 |
| Institution/Association: | American Agricultural Economics Association>2008 Annual Meeting, July 27-29, 2008, Orlando, Florida |
| Total Pages: | 49 |
| Collections: | 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida
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| 53707.pdf | | 215Kb | PDF | View/Open |
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