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Inequality, Growth, and Congestion Externalities

Author

Listed:
  • Aiyemo Babatunde

    (Department of Economics, Finance and Accounting, SUNY, Oneonta, USA)

  • Morshed AKM Mahbub

    (Department of Economics, Southern Illinois University, Carbondale, USA)

Abstract

We describe and numerically simulate the aggregate and distributional properties of an endogenous growth model with an infrastructure externality which is subject to relative congestion. We show that the congested externality induces higher growth, greater inequality, labor/leisure trade-off ambiguities and an ineffective capital income tax for the government to achieve long-term redistribution goals. We demonstrate the economic implications of congestions in production and consumption externalities on the public to private capital ratio, growth and income distribution. Finally, we discuss alternative tax options for promoting inclusive growth.

Suggested Citation

  • Aiyemo Babatunde & Morshed AKM Mahbub, 2021. "Inequality, Growth, and Congestion Externalities," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(2), pages 565-606, June.
    • Handle: RePEc:bpj:bejmac:v:21:y:2021:i:2:p:565-606:n:2
    DOI: 10.1515/bejm-2020-0268
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    More about this item

    Keywords

    congestion; externalities; growth; inequality; public capital;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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