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Congestion and Public Capital

Walter Fisher and Stephen J Turnovsky ()

No 47, Economics Series from Institute for Advanced Studies

Abstract: This paper analyzes the impact of public investment on the dynamics of private capital formation in an intertemporal optimizing market-clearing framework. The key feature characterizing the analysis is that the public good is treated as a durable capital good, subject to congestion. We show how in the presence of congestion the effect of government investment on private capital formation involves a tradeoff between the degree of substitution between private and public capital in production and the degree of congestion. Both lump-sum and distortionary tax financing are considered, with this tradeoff being tightened in the latter case.

Keywords: Congestion; Public Capital (search for similar items in EconPapers)
JEL-codes: E62 H41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1997-07
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http://www.ihs.ac.at/publications/eco/es-47.pdf First version, 1997 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:47

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