We consider a two-sector economy, where public infrastructure un- evenly affects the productivity of the sectors. Private and public capital are produced with different technologies, and the sector producing the infrastructure is not benefitting from its services. The government provides both infrastructure investment and a flow of intermediate goods, enhancing the productivity of the sector producing the infrastructure. We show that this economy displays perpetual growth whenever the share of public expenditure on intermediate goods is higher than that on infrastructure. In the long run the public capital, the private capital and the GDP grow at the same steady rate and the share of total public expenditure on GDP is constant. We study numerically the transition to the long run, along which the structural adjustments take place. We single out the conditions under whichthe tax rate is growth maximizing

A two-sector model of public investment and growth / G. Felice. - Milano : Department of Economics in Milan university, 2009 Oct.

A two-sector model of public investment and growth

G. Felice
Primo
2009

Abstract

We consider a two-sector economy, where public infrastructure un- evenly affects the productivity of the sectors. Private and public capital are produced with different technologies, and the sector producing the infrastructure is not benefitting from its services. The government provides both infrastructure investment and a flow of intermediate goods, enhancing the productivity of the sector producing the infrastructure. We show that this economy displays perpetual growth whenever the share of public expenditure on intermediate goods is higher than that on infrastructure. In the long run the public capital, the private capital and the GDP grow at the same steady rate and the share of total public expenditure on GDP is constant. We study numerically the transition to the long run, along which the structural adjustments take place. We single out the conditions under whichthe tax rate is growth maximizing
ott-2009
Structural change ; Transition ; Public investments ; Growth
Settore SECS-P/01 - Economia Politica
http://www.economia.unimi.it/uploads/wp/Deas2009_28wp.pdf
Working Paper
A two-sector model of public investment and growth / G. Felice. - Milano : Department of Economics in Milan university, 2009 Oct.
File in questo prodotto:
Non ci sono file associati a questo prodotto.
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/149914
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact