Public infrastructure, production organization, and economic development

Kohei Daido and Ken Tabata

Journal of Macroeconomics, 2013, vol. 38, issue PB, 330-346

Abstract: We develop a political economy model of growth to examine economic development led by the interactions between an economic decision concerning a firm’s production technology (CRS vs. IRS technology) and a political decision concerning public infrastructure. We show that multiple equilibrium growth paths occur due to differences in expectations regarding the quality of public infrastructure. These multiple paths illustrate why economies with poor initial conditions can catch up to and, furthermore, overtake economies with better initial conditions. Our result could explain the experiences of some East Asian countries where the co-evolution of public infrastructure and industrial transformation spurred economic development.

Keywords: Public infrastructure; Political economy; Production organization; Overlapping generations model (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (10)

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Working Paper: Public Infrastructures, Production Organizations, and Economic Development (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:38:y:2013:i:pb:p:330-346

DOI: 10.1016/j.jmacro.2013.09.013

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