Public Capital, Income Distribution and Growth

Yoseph Getachew

No 2008-056, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: Public capital investment plays an important role in long run growth through enhancing productivity and complementing the accumulation of private inputs. Under appropriate conditions, public capital could also have important implications for income distribution dynamics. When the credit market is imperfect and there are diminishing returns to private factors, income inequality is negatively related to economic growth. The dynamics of income distribution is determined by relative income shares of private input, wherever initial endowment differs among individuals. Therefore, if the provision of public capital has an effect on relative income shares of private inputs, then it will have an effect on income distribution dynamics. In this case, public capital once more becomes an important determinant of long-run growth through its indirect effect on income distribution. The paper studies this and other interesting issues with respect to public capital, income inequality and economic growth.

Keywords: Income Distribution; Public Capital; Economic Growth (search for similar items in EconPapers)
JEL-codes: D31 H54 O41 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2008056

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