in The Review of Economic Studies
July 2008; p ublished online July 2008 .
Journal Article. Subjects: National Government Expenditures and Related Policies; Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook. 10015 words.
In this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure. We characterize and solve for...