Infrastructure provision and macroeconomic performance

Abstract

Behavioral di¤erences between economies where infrastructure is privately provided and where the government is the sole provider are examined in the context of a growing economy. The choice between private and public provision generates di¤erences in the private sector's ability to internalize capital utilization decisions and market prices along the equilibrium path. This in turn has a crucial impact on the e¤ects of …scal policy on resource allocation and welfare in each regime. If the government wants to stimulate infrastructure investment, a subsidy to private providers yields signi…cantly higher welfare gains than an equivalent increase in direct government investment, even with lump-sum tax …nancing. On the other hand, an income tax is more distortionary under private than under government provision. In designing optimal …scal policy, while a constant income tax-infrastructure subsidy combination is jointly required to attain the …rst-best equilibrium under private provision, the optimal income tax rate must be time-varying under government provision.

Examining the maturity of South Africa’s government departments to implement the Infrastructure Delivery Management System (IDMS)

“…The effects of infrastructure productivity have been studied using economic models (Lakshmanan, 2011: 1-12). In some instances, behavioural approaches have been used to calculate the impact of infrastructure on national growth (Chatterjee & Mahbub Morshed, 2011: 1288-1306.…”

The impact of infrastructure investment on economic growth in the United Kingdom

“…Alternatively, there are behavioral approaches, with estimates of a cost or profit function including capital stock and taking account the differing characteristics of public versus private capital (Romp and de Haan, 2007;Chatterjee and Mahbub Morshed, 2011). Each approach has strengths and weaknesses but there is more consensus that public capital has an effect on economic growth (Chatterjee and Mahbub Morshed, 2011), with most of the debate over the causality and output elasticity or multiplier rather than the effect itself (Sturm, Jacobs and Groote, 1999). However, the overarching explanation as to what drives economic growth is the multiplier effect (Haughwout, 2002).…”

“…The media and political figures often overestimate the economic power of the multiplier effects to result in faster output growth, which allows for increased public investment (Domański and Gwosdz, 2010;Chatterjee and Mahbub Morshed, 2011). Earlier studies found a relatively strong growth rate when increasing infrastructure investment, with a 1% increase in the public capital stock raising total factor productivity by up to 0.4%.…”

Public Expenditures, Growth, and Distribution in a Mixed Regime of Education with a Status Motive

“…Our framework can also be related to the literature on government versus private provision of public goods (see, e.g., Devarajan, Xie, and Zou ; Chatterjee and Morshed ). An important difference of these frameworks with ours, though, is that they do not consider either the possibility of parallel investments (public–private) which may interact with each other, or the issue of distribution.…”