The Macroeconomic Effects of Funding U.S. Infrastructure

Jim Malley and Apostolis Philippopoulos

Working Papers from Business School - Economics, University of Glasgow

Abstract: This paper quantitatively assesses the macroeconomic effects of the recently agreed U.S. bipartisan infrastructure spending bill in a neoclassical growth model. We add to the literature by considering a more detailed tax structure, different types of infrastructure spending and linkages between the final and intermediate goods sectors. We find that infrastructure spending cannot fully pay for itself despite public and private capital being underprovided. We further find long-run output multipliers above unity if infrastructure spending and rising public debt are financed by consumption, dividend and labour income taxes and below one for corporate taxes. We also show that except for the consumption tax, the size of the multipliers critically depends on the Frisch labour supply elasticity. Finally, when we compute differences in welfare across different public financing regimes, the net welfare gains and losses are relatively minor.

Keywords: Infrastructure investment; public capital; fiscal multipliers; taxation (search for similar items in EconPapers)
JEL-codes: E62 H41 H54 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-mac, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The macroeconomic effects of funding U.S. infrastructure (2023)
Working Paper: The Macroeconomic Effects of Funding U.S. Infrastructure (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2022_03

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