Infrastructure provision and macroeconomic performance

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 fis...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2011-08, Vol.35 (8), p.1288-1306
Main Authors: Chatterjee, Santanu, Mahbub Morshed, A.K.M.
Format: Article
Language:English
Subjects:
Capital goods
Capital utilization
Congestion
Economic growth
Fiscal policy
Government policy
Government subsidies
Infrastructure
Infrastructure provision
Infrastructure provision Capital utilization User cost Fiscal policy Public capital Economic growth
Macroeconomics
Market prices
Prices
Public capital
Public infrastructure
Studies
Subsidies
User cost
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Summary: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.
ISSN:0165-1889
1879-1743
DOI:10.1016/j.jedc.2011.03.007