Many studies have found that the economic benefits from investment in urban infrastructure are substantial. In Australia, much of the responsibility for the provision of urban infrastructure rests with regional governments. Throughout the1990's many of these governments embarked on a program of fiscal restraint, seeking to restore financial positions weakened by exposure to failed government enterprises. A large proportion of this fiscal adjustment appears to have been borne by spending on public infrastructure. Today, regional government policy attention is again focussing on public infrastructure. In spite of the now robust fiscal positions of Australia's regional governments, they remain reluctant to finance infrastructure through debt, and raising the rates of existing taxes is perceived as politically unpopular. Instead, governments are exploring alternative financing instruments, such as developer charges and public-private partnerships. This paper uses a dynamic multi-regional CGE model (MMRF) to evaluate the regional macroeconomic consequences of four methods of financing a program of regional government infrastructure provision. The methods are developer charges, debt, payroll tax and residential rates. We demonstrate that the net gains from a program of urban infrastructure development are quite sensitive to the chosen financing means. The net gains tend to be greatest under rates and debt financing, and least under developer charges.
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Find related papers by JEL classification: D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies R51 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies R53 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
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