After Maastricht: Public Investment, Economic Integration and International Capital Mobility
AbstractThis paper studies some implications of economic integration in the context of a neoclassical model of international trade, public investment, and capital mobility. Owing to the endogeneity of the productive public capital stock, international capital mobility, while equalizing returns to capital, can lead to a divergence in the wages earned by labor. The authors also demonstrate that international capital mobility can set off an infrastructure investment boom. If the benefits of capital spill over across national borders, governments in the Nash equilibrium spend the '1992' dividend on an excessive provision of public services, attempting to free-ride on the public capital of their neighbors. Copyright 1994 by The London School of Economics and Political Science.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 61 (1994)
Issue (Month): 243 (August)
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Other versions of this item:
- Clarida, R. & Findlay, R., 1993. "After Maastricht: Public Investment, Economic Integration, and International Capital Mobility," Discussion Papers 1993_05, Columbia University, Department of Economics.
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- Giovanni Ganelli & Juha Tervala, 2007.
"Public Infrastructures, Public Consumption, and Welfare in a New-Open-Economy-Macro Model,"
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- Ganelli , Giovanni & Tervala, Juha, 2009. "Public infrastructures, public consumption and welfare in a new open economy macro model," Research Discussion Papers 8/2009, Bank of Finland.
- Lejour, A.M. & Verbon, H.A.A., 1996. "Fiscal Policies and Endogenous Growth in Integrated Capital Markets," Discussion Paper 1996-76, Tilburg University, Center for Economic Research.
- KEEN, Michael & MARCHAND, Maurice, 1996.
"Fiscal Competition and the Pattern of Public Spending,"
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1996001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
- Bond, Eric W., 1997. "Transportation infrastructure investments and regional trade liberalization," Policy Research Working Paper Series 1851, The World Bank.
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