Economics at your fingertips  

Public Infrastructure and Economic Takeoff

Prakash Chandra Sapkota

Business and Economic Research, 2020, vol. 10, issue 1, 313-333

Abstract: The purpose of this paper is to incorporate the role of public infrastructure investment on economic takeoff process in underdeveloped and emerging economies in a dynamic general equilibrium model. We use a two-period overlapping generations model, and consider two types of technologies (traditional and modern) that are used to produce the final output of firms. This paper confirms that economic takeoff is possible only when the capital per labor unit exceeds a certain threshold level. Thus, the takeoff process depends on the productivity race between traditional and modern technologies with increasing public infrastructure investment, while public infrastructures foster the productivity of both technologies. Similarly, an effective tax rate supports the takeoff process by stimulating the wage rate which in turn increases the capital per labor along with the saving rates. Hence, we clarify the conditions required for succeeding in the takeoff of an economy. In addition, we review some empirical evidence related to the output elasticity of public infrastructures.

Keywords: Public infrastructure; Early-stage; Economic takeoff; Threshold; Effective tax rate (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

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:

Access Statistics for this article

Business and Economic Research is currently edited by Daisy Young

More articles in Business and Economic Research from Macrothink Institute
Bibliographic data for series maintained by Technical Support Office ( this e-mail address is bad, please contact ).

Page updated 2021-03-28
Handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:313-333