Welfare dynamics in an endogenous growth model: the impact of the transition

Welfare gains are examined under two different measures. The first is based on changes in steady states. The second includes the additional gains made during the transition. To this end, I build welfare profiles based on unanticipated fiscal shocks. I find that, when the transition is neglected, welfare net benefits of policy may be biased. This is because most welfare gains materialize during this phase. Moreover, the welfare profiles are not robust to the elasticity of labor supply.}