An Analysis of the Optimal Provision of Public Infrastructure: A Computational Model Using Mexican Data

22 Pages Posted: 15 Feb 2006

See all articles by Andrew Feltenstein

Andrew Feltenstein

Georgia State University - Department of Economics

Jiming Ha

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1996

Abstract

An intertemporal general equilibrium model is used to examine infrastructure effects on the Mexican national income. Production functions are estimated for the major sectors of the economy in which sectoral output depends on inputs of capital and labor, as well as the stocks of the public infrastructure. The analysis indicates that despite high estimated output elasticities with respect to public infrastructure, increased expenditure on infrastructure has rapidly decreasing benefits. Some benefits could be achieved by modest increases in capital expenditures, although at the cost of significantly higher inflation and real interest rates. The increase in real interest rates causes these benefits to be greatly reduced.

JEL Classification: H54, H62

Suggested Citation

Feltenstein, Andrew and Ha, Jiming, An Analysis of the Optimal Provision of Public Infrastructure: A Computational Model Using Mexican Data (February 1996). IMF Working Paper No. 96/13, Available at SSRN: https://ssrn.com/abstract=882914

Andrew Feltenstein (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-4130093 (Phone)

Jiming Ha

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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