EconPapers    
Economics at your fingertips  
 

Factor-biased public capital and private capital crowding out

Pedro Bom ()

Journal of Macroeconomics, 2017, vol. 52, issue C, 100-117

Abstract: This paper studies the dynamic effects of public investment on private capital accumulation in a general equilibrium macroeconomic model of a small open economy with factor-biased public capital. I show that public investment induces rather complex private capital dynamics—falling in the short and in the long run, but potentially increasing along transition—if public capital augments private capital and private inputs are gross complements in production. Whether private investment is crowded in or out during transition critically depends on parameters that are empirically hard to measure, such as the labor supply elasticity and the elasticity of substitution between private inputs—a small increase in the latter from 0.5 to 0.6, for instance, turns a totally negative transitional effect into a predominantly positive one. These results help rationalize the lack of empirical consensus on the relationship between public and private investment.

Keywords: Public investment; Public capital; Infrastructure capital; Private capital; Crowding out; Factor bias (search for similar items in EconPapers)
JEL-codes: E22 E62 F41 H54 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016407041730109X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:52:y:2017:i:c:p:100-117

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-10-08
Handle: RePEc:eee:jmacro:v:52:y:2017:i:c:p:100-117