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Public Capital and Growth

In: Convergence After Divergence? Regional Growth in Europe

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  • Gabriele Tondl

    (Wirtschaftsuniversität)

Abstract

In recent years, several growth economists, like (1990), (1997), Aschauer 1989, 1997, etc., have focused on the role of public capital in production and growth. Public capital can be considered as a special type of capital and thus as a production input, but it enters also in a very particular relationship with private capital. First, public capital is a complementary input to private capital and enhances its productivity. As a consequence, public capital can enable endogenous growth. On the other side, since public capital requires financing through taxes, which has a contractory effect on growth, policies to promote public investment to stimulate a region’s growth have natural limits. Moreover, the need of financing means that rich regions with a large tax basis automatically can afford a high public investment. This makes it hard for poor regions to catch up when rich regions steadily upgrade their public capital stock.

Suggested Citation

  • Gabriele Tondl, 2001. "Public Capital and Growth," Springer Books, in: Convergence After Divergence? Regional Growth in Europe, chapter 6, pages 210-230, Springer.
    • Handle: RePEc:spr:sprchp:978-3-7091-6219-4_6
    DOI: 10.1007/978-3-7091-6219-4_6
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