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Modeling the Impact of Public Infrastructure investments in the U.S.: A CGE Analysis

Author

Listed:
  • David Suárez-Cuesta

    (Faculty of Statistical Studies, Ciudad Universitaria)

  • Maria C. Latorre

    (Faculty of Statistical Studies, Ciudad Universitaria)

Abstract

This study offers a computable general equilibrium analysis of the $550 billion devoted to new infrastructure investment (new and remodeled physical infrastructure for transportation, information and public services) in the United States under the Infrastructure Investment and Jobs Act, a federal law signed by President Joseph Biden in November 2021. The simulations are based on the state-level distribution of funds and distinguish between the construction phase (short run) and the operational phase (long run). Gross domestic product (GDP) and labor demand react to the government spending stimulus after the first year by growing 0.24% and 0.44%, respectively. The gains derived from this investment plan are higher in the long term once investments increase the country’s capital stock; GDP increases by 1.39% and wages by 3.94%. This paper analyzes the efficiency of the current distribution of funds across sectors, and finds that the current distribution benefits the United States economy more. Even though a slightly higher GDP impact could have been reached (1.42%) if all the funds were devoted to transport services, the price increases would result in lower real wage increases.

Suggested Citation

  • David Suárez-Cuesta & Maria C. Latorre, 2023. "Modeling the Impact of Public Infrastructure investments in the U.S.: A CGE Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 29(3), pages 165-176, August.
    • Handle: RePEc:kap:iaecre:v:29:y:2023:i:3:d:10.1007_s11294-023-09875-w
    DOI: 10.1007/s11294-023-09875-w
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    References listed on IDEAS

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    More about this item

    Keywords

    C68; H54; R42;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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