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Regional Macroeconomic Outcomes Under Alternative Arrangements for the Financing of Urban Infrastructure

James Giesecke, Peter Dixon and Maureen Rimmer

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: Many studies have found that the economic benefits from investment in urban infrastructure are substantial. In Australia, much of the responsibility for the provision of urban infrastructure rests with regional governments. Throughout the1990's many of these governments embarked on a program of fiscal restraint, seeking to restore financial positions weakened by exposure to failed government enterprises. A large proportion of this fiscal adjustment appears to have been borne by spending on public infrastructure. Today, regional government policy attention is again focussing on public infrastructure. In spite of the now robust fiscal positions of Australia's regional governments, they remain reluctant to finance infrastructure through debt, and raising the rates of existing taxes is perceived as politically unpopular. Instead, governments are exploring alternative financing instruments, such as developer charges and public-private partnerships. This paper uses a dynamic multi-regional CGE model (MMRF) to evaluate the regional macroeconomic consequences of four methods of financing a program of regional government infrastructure provision. The methods are developer charges, debt, payroll tax and residential rates. We demonstrate that the net gains from a program of urban infrastructure development are quite sensitive to the chosen financing means. The net gains tend to be greatest under rates and debt financing, and least under developer charges.

Keywords: multi-regional CGE; dynamic CGE; infrastructure finance; regional policy (search for similar items in EconPapers)
JEL-codes: D58 R13 R51 R53 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-geo, nep-mac, nep-pbe and nep-ure
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Published in Papers in Regional Science, Vol 87(1), March 2008, pp. 3-31.

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