Growth and Public Infrastructure
The paper analyzes a multi-country extension of the Barro model of productive public expenditure. In the presence of infrastructural externalities between countries the provision of infrastructure will be inefficiently low if countries do not coordinate. This provides a role for a supra-national body, such as the EU, to coordinate the policies of the individual governments. It is shown how the supranational body can ensure the efficient level of infrastructure provision and, as a result, obtain an increased rate of growth. The results of the paper also show how capital flows between countries act to equalize growth rates. This can help explain why there is limited empirical evidence for tax rates causing a difference in growth rates between countries. This is not the same as saying taxation does not affect growth: if production requires public infrastructure then taxation is needed for growth. The flow of capital acts to distribute the benefit of this across countries.
Year of publication: |
2009-01-19
|
---|---|
Authors: | Hashimzade, Nigar ; Myles, Gareth D. |
Institutions: | Henley Business School, University of Reading |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Why Care? Social Norms, Relative Income and the Supply of Unpaid Care
Giusta, Marina Della, (2011)
-
Growth and Inverted U in Child Labour: A Dual Economy Approach
Hashimzade, Nigar, (2010)
-
Family Values and Educational Choice
Giusta, Marina Della, (2009)
- More ...