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Public and Private Maintenance Expenditure in a Growing Economy

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  • S. Devrim Yilmaz

Abstract

This paper studies the optimal taxation structure and public maintenance spending in an endogenous growth model where public maintenance spending effects the efficiency of public and private capital. Private firms also spend on maintenance, which increases the effieicieny of private capital and reduces its depreciation. The growth-maximizing tax rate and maintenance spending are derived in this baseline setting, and the first-best welfare maximizing solution is also considered. The model is then extended to analyze the congestion effects of private usage on the efficiency of public and private capital, as well as the impact of maintenance spending tax refunds received by the private sector on the optimal tax rate.

Suggested Citation

  • S. Devrim Yilmaz, 2008. "Public and Private Maintenance Expenditure in a Growing Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 108, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:108
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/cgbcr/discussionpapers/dpcgbcr108.pdf
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    References listed on IDEAS

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