Abstract
In this paper, we study under which circonstances public deficit policies may improve welfare, even if they affect negatively the longrun growth rate of the economy. To answer this question, we use a representative agent model where endogenous growth results from constants returns in public and private capital. We, then, show that a temporary tax-cut policy may never improve welfare. Temporary increase of public investment spendings may enhance welfare in "slow-adjusting" economies. At the opposite, temporary increase of a private investment subsidy is welfare improving in "fast-adjusting" economics.
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