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Infrastructure Provision and Macroeconomic PerformanceSantanu ChatterjeeUniversity of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics AKM Mahbub MorshedSouthern Illinois University at Carbondale - Department of Economics March 4, 2011 Abstract: 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, O4 working papers seriesDate posted: November 8, 2006 ; Last revised: March 7, 2011Suggested CitationContact Information
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