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Should Public Capital Be Subsidized or Provided?

Author

Listed:
  • Shantayanan Devarajan

    (World Bank)

  • Danyang Xie

    (HKUST)

  • Heng-Fu Zou

    (World Bank)

Abstract

In an endogenous-growth model, we consider alternative ways of providing public capital using distortionary taxes. We show that if the government provides the good, the resulting growth rate and welfare may or may not be higher than under laissez-faire. By contrast, if the government subsidizes private providers, not only are growth and welfare higher than under public provision, they are also unambiguously higher than under laissez-faire. Forthcoming 1998. Journal of Monetary Economics.

Suggested Citation

  • Shantayanan Devarajan & Danyang Xie & Heng-Fu Zou, 2002. "Should Public Capital Be Subsidized or Provided?," Macroeconomics 0212005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0212005
    Note: Type of Document - PDF; prepared on PC; to print on HP; pages: 22 ; figures: none
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    More about this item

    Keywords

    Public Capital; Subsidy; Taxes; Public Provision;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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