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Lindahl Pricing, Nonrival Infrastructure and Endogenous Growth

Dipankar Dasgupta

Journal of Public Economic Theory, 2001, vol. 3, issue 4, 413-30

Abstract: The paper constructs a model of endogenous growth where infrastructure is an accumulable stock generating a nonrival input service. A typical market economy cannot attain the socially optimum steady state path, since nonrivalry precludes competitive pricing of infrastructure. However, there exist agent specific prices for the infrastructural service, a price for the infrastructural stock, a rate of interest, and a subsidy for the representative household that can sustain the optimal path as a dynamic Lindahl equilibrium. The rates of return from physical and infrastructural capital equal the rate of interest. Investment programs are socially optimum. The government's budget is balanced. Copyright 2001 by Blackwell Publishing Inc.

Date: 2001
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