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Social Infrastructure and the Preservation of Physical Capital: Equilibria and Transitional Dynamics

Helena Soares, Tiago Sequeira, Pedro Macias Marques (), Orlando Gomes and Alexandra Lopes ()
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Pedro Macias Marques: University of Évora, CIMA ? Research Centre in Mathematics and Applications

No 12-04, Working Papers Series 2 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: We study the mechanisms according to which social infrastructure influences the preservation of physical capital and, consequently, economic growth. The model considers that social infrastructure is a specific type of human capital, which acts in order to preserve already existing physical capital, by, e.g., reducing the incentive for rent seeking or corruption. Using an innovative methodology in economics, the Gröbner bases, we study the equilibrium of our model and conclude for the existence of two feasible steady-states or of unicity according to different combinations of parameters, highlighting a trade-off between consumption and production on one hand and social infrastructure and physical capital accumulation, on the other. We also present sufficient conditions for saddle-path stability. Finally, we describe transitional dynamics and calculate welfare effects from which we show that strengthening social infrastructure increases welfare.

Keywords: Social Infrastructure; Physical Capital Depreciation; Endogenous Growth; Equilibrium Multiplicity; Gröbner Bases (search for similar items in EconPapers)
JEL-codes: C02 C62 O41 O43 (search for similar items in EconPapers)
Date: 2012-07-15
New Economics Papers: this item is included in nep-dge
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Journal Article: Social infrastructure and the preservation of physical capital: Equilibria and transitional dynamics (2018) Downloads
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