 A Theory of Infrastructure-led DevelopmentCentre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Abstract: This paper proposes a theory of long-run development based on public infrastructure as the main engine of growth. The government, in addition to investing in infrastructure, spends on health services, which in turn raise labor productivity and lower the rate of time preference. Infrastructure affects the production of both commodities and health services. As a result of network effects, the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself. This in turn may cause multiplicity of equilibrium growth paths. Provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment outlays, an increase in the share of spending on infrastructure (financed by a cut in unproductive expenditure or foreign grants) may facilitate the shift from a low growth equilibrium, characterized by low productivity and low savings, to a high growth steady state. Pages: 48 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:83 Access Statistics for this paper More papers in Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester Contact information at EDIRC. |
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