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Sustainable infrastructure investment with labor-only production

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  • Tapiero, Charles S.
  • Kogan, Konstantin
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    Abstract

    The purpose of this paper is to consider a partial equilibrium model for a sustainable infrastructure investment in a labor-production economy. We consider an inter-temporal Stackelberg game in a "capital primitive" economy where all capital investments are made by a Central Agency (a government). The government is assumed to have a number of objectives including sustainability of the infrastructure investments, while firms are assumed to be myopic, maximizing only current profits and paying taxes as a function of their returns. Both open-loop and closed-loop (feedback) Stackelberg strategies are considered. Based on the analysis of the investment game, some conclusions are drawn regarding the propensity to invest as a function of sustainability constraints, the taxation rates and employment levels. We then show that investments can tend to a constant level and thus strategic government goals of sustainability and employment growth can be planned only if labor costs and the general price index are steady or characterized by a set of conditions ensuring the attainability of the steady-state investment.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 113 (2008)
    Issue (Month): 2 (June)
    Pages: 876-886

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    Handle: RePEc:eee:proeco:v:113:y:2008:i:2:p:876-886

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    Web page: http://www.elsevier.com/locate/ijpe

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    References

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    1. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
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    17. Akkermans, H. A. & van der Horst, H., 2002. "Managing IT infrastructure standardisation in the networked manufacturing firm," International Journal of Production Economics, Elsevier, vol. 75(1-2), pages 213-228, January.
    18. Shah, Anwar, 1992. "Dynamics of Public Infrastructure, Industrial Productivity and Profitability," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 28-36, February.
    19. Lu, Chin-Shan & Yang, Ching-Chiao, 2007. "An evaluation of the investment environment in international logistics zones: A Taiwanese manufacturer's perspective," International Journal of Production Economics, Elsevier, vol. 107(1), pages 279-300, May.
    20. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
    21. Rioja, Felix K., 1999. "Productiveness and welfare implications of public infrastructure: a dynamic two-sector general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 58(2), pages 387-404, April.
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    Cited by:
    1. Gunasekaran, Angappa & Spalanzani, Alain, 2012. "Sustainability of manufacturing and services: Investigations for research and applications," International Journal of Production Economics, Elsevier, vol. 140(1), pages 35-47.

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