Potential Growth Path Seeking Model with Income Transfers

Abstract

An analysis of fiscal policy is needed for long-term plan in constructing infrastructures. This paper constructs a potential growth path search model with income transfer constrains. The model is based on Turnpike model maximizing the consumption utility. This model shows the optimal rate of composition at every industry, and shows that the rate of potential economic growth is 6.6%. The numerical analysis shows the change of the potential growth path and the optimal industrial structure with increase of national bonds.