Output Dynamics, Technology, and Public Investment

Pedro Bom, Ben Heijdra () and Jenny Ligthart

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: The paper studies the dynamic output effects of public infrastructure investment in a small open economy. We develop an overlapping generations model that includes a production externality of public capital and a wealth e ect on labor supply. Public capital enters the rm's production function under various technological scenarios. We show that if factors of production are gross complements and public capital is Solow neutral, which is the empirically plausible case, the long-run output multiplier falls short of its Hicks-neutral value. The way in which public capital augments factor productivity crucially a ects the dynamics of private capital and net foreign assets, but yields qualitatively similar output dynamics. In contrast to conventional results obtained from hysteretic models, we nd non-monotonic output dynamics of a public investment impulse in the non-hysteretic model. Schmitt-Grohe and Uribe's (2003) nding of identical impulse responses across the two model types is thus not robust to the inclusion of spillovers of public capital.

Keywords: infrastructure capital; public investment; fiscal policy; output multipliers; transitional dynamics; technology (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-06-01
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://icepp.gsu.edu/files/2015/03/ispwp1024.pdf (application/pdf)

Related works:
Working Paper: Output Dynamics, Technology, and Public Investment (2010)
Working Paper: Output Dynamics, Technology, and Public Investment (2010)
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:ays:ispwps:paper1024

Access Statistics for this paper

More papers in International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by Paul Benson ().