Delays in Public Goods
Santanu Chatterjee (),
Olaf Posch () and
No 1702, Working Papers from University of Otago, Department of Economics
In this paper, we analyze the consequences of delays and cost overruns typically associated with the provision of public infrastructure in the context of a growing economy. Our results indicate that uncertainty about the arrival of public capital can more than offset its positive spillovers for private-sector productivity. In a decentralized economy, unanticipated delays in the provision of public capital generate too much consumption and too little private investment relative to the first-best optimum. The characterization of the first-best optimum is also affected: facing delays in the arrival of public goods, a social planner allocates more resources to private investment and less to consumption relative to the first-best outcome in the canonical model (without delays). The presence of delays also lowers equilibrium growth, and leads to a diverging growth path relative to that implied by the canonical model. This suggests that delays in public capital provision may be a potential determinant of cross-country differences in income and economic growth.
Keywords: Public goods; delays; time overrun; cost overrun; implementation lags; fiscal policy; economic growth (search for similar items in EconPapers)
JEL-codes: C61 E62 H41 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pub
Date: 2017-02, Revised 2017-02
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http://www.otago.ac.nz/economics/otago634418.pdf First version, 2017 (application/pdf)
Working Paper: Delays in Public Goods (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1702
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