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Public capital maintenance and congestion: Long-run growth and fiscal policies

Evangelos Dioikitopoulos () and Sarantis Kalyvitis ()

Journal of Economic Dynamics and Control, 2008, vol. 32, issue 12, 3760-3779

Abstract: In this paper we study an endogenous growth model, in which public maintenance expenditures affect the depreciation rate of public capital and the latter is subject to congestion. We find that economies with low congestion in public infrastructure will require a threshold level of public capital maintenance for ongoing growth. We also examine the fiscal implications of public capital maintenance policies and we find that the composition of public capital expenditures under congestion is a crucial determinant of optimal and growth-maximizing fiscal policies. The government can affect the return of public capital by re-allocating public expenditures between 'new' public investment and maintenance and hence avoid excessive taxation that is required under increasing congestion.

Keywords: Public; capital; maintenance; Congestion; Optimal; fiscal; policies (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:32:y:2008:i:12:p:3760-3779

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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