Infrastructure Provision and Macroeconomic Performance
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics
AKM Mahbub Morshed
Southern Illinois University at Carbondale - Department of Economics
March 4, 2011
This paper studies the differences between private and government provision of infrastructure. Capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy. A subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed. The case for private provision is much stronger in economies characterized by high levels of congestion. The choice between private and government provision also has a crucial effect on the design of optimal fiscal policy.
Number of Pages in PDF File: 42
Keywords: Infrastructure Provision, Capital Utilization, User Cost, Fiscal Policy, Public Capital, Economic Growth
JEL Classification: D9, E2, E6, H2, O4working papers series
Date posted: November 8, 2006 ; Last revised: March 7, 2011
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