A Comparative Analysis of Funding Schemes for Public Infrastructure Spending in Quebec

The government of Quebec has launched a major public infrastructure spending program funded essentially by debt. This choice can have long term consequences on growth if the eviction effect is strong. In this paper, we use a recursive dynamic model of the Quebec economy to analyse alternative funding schemes for scaling up infrastructure in the province. We perform the impact analysis with and without the assumption of externalities of public infrastructure as modeled in Estache et al. (2010) combined with estimated sectoral elasticities for Quebec following the procedure proposed by Harchaoui and Tarkhani (2003) based on Canadian estimations. We conduct a comparative analysis with tax-increase scenarios on different tax bases, such as income tax, sales tax and business tax. We also run our simulations with alternative interest rates to verify if our ranking of best funding options is robust to interest rates changes. See above See above