IDEAS home Printed from https://ideas.repec.org/a/mth/ber888/v10y2020i1p313-333.html
   My bibliography  Save this article

Public Infrastructure and Economic Takeoff

Author

Listed:
  • Prakash Chandra Sapkota

Abstract

The purpose of this paper is to incorporate the role of public infrastructure investment on economic takeoff process in underdeveloped and emerging economies in a dynamic general equilibrium model. We use a two-period overlapping generations model, and consider two types of technologies (traditional and modern) that are used to produce the final output of firms. This paper confirms that economic takeoff is possible only when the capital per labor unit exceeds a certain threshold level. Thus, the takeoff process depends on the productivity race between traditional and modern technologies with increasing public infrastructure investment, while public infrastructures foster the productivity of both technologies. Similarly, an effective tax rate supports the takeoff process by stimulating the wage rate which in turn increases the capital per labor along with the saving rates. Hence, we clarify the conditions required for succeeding in the takeoff of an economy. In addition, we review some empirical evidence related to the output elasticity of public infrastructures.

Suggested Citation

  • Prakash Chandra Sapkota, 2020. "Public Infrastructure and Economic Takeoff," Business and Economic Research, Macrothink Institute, vol. 10(1), pages 313-333, March.
  • Handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:313-333
    as

    Download full text from publisher

    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/16628/12890
    Download Restriction: no

    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/16628
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ingrid Ott & Stephen J. Turnovsky, 2006. "Excludable and Non‐excludable Public Inputs: Consequences for Economic Growth," Economica, London School of Economics and Political Science, vol. 73(292), pages 725-748, November.
    2. Pakrashi, Debayan & Frijters, Paul, 2017. "Takeoffs, Landing, and Economic Growth," ADBI Working Papers 641, Asian Development Bank Institute.
    3. Chatterjee, Santanu & Turnovsky, Stephen J., 2012. "Infrastructure and inequality," European Economic Review, Elsevier, vol. 56(8), pages 1730-1745.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Calderon, Cesar & Serven, Luis, 2014. "Infrastructure, growth, and inequality : an overview," Policy Research Working Paper Series 7034, The World Bank.
    2. Chetan Ghate & Gerhard Glomm & Jialu Liu Streeter, 2016. "Sectoral Infrastructure Investments in an Unbalanced Growing Economy: The Case of Potential Growth in India," Asian Development Review, MIT Press, vol. 33(2), pages 144-166, September.
    3. Joachim Wagner, 2005. "Nascent and infant entrepreneurs in Germany. Evidence from the Regional Entrepreneurship Monitor (REM)," Labor and Demography 0504010, University Library of Munich, Germany.
    4. Chandril Bhattacharyya, 2016. "A note on endogenous growth with public capital," Economics Bulletin, AccessEcon, vol. 36(4), pages 2506-2518.
    5. Klenert, David & Mattauch, Linus & Edenhofer, Ottmar & Lessmann, Kai, 2018. "Infrastructure And Inequality: Insights From Incorporating Key Economic Facts About Household Heterogeneity," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 864-895, June.
    6. Takeo Hori & Noritaka Maebayashi & Keiichi Morimoto, 2018. "Tax Evasion and Optimal Corporate Income Tax Rates in a Growing Economy," Discussion Papers 41, Meisei University, School of Economics.
    7. Economides, George & Park, Hyun & Philippopoulos, Apostolis, 2011. "How Should The Government Allocate Its Tax Revenues Between Productivity-Enhancing And Utility-Enhancing Public Goods?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(3), pages 336-364, June.
    8. Bom, Pedro R.D. & Ligthart, Jenny E., 2014. "Public infrastructure investment, output dynamics, and balanced budget fiscal rules," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 334-354.
    9. Batuo E. Michael & George Kararach & Issam Malki, 2021. "Working Paper 353 - Inequality and the role of macroeconomic and institutional forces in Africa," Working Paper Series 2479, African Development Bank.
    10. Robert J. Sonora, 2022. "A panel analysis of income inequality and energy use," Contemporary Economic Policy, Western Economic Association International, vol. 40(1), pages 83-97, January.
    11. Andreas Irmen & Johanna Kuehnel, 2009. "Productive Government Expenditure And Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 692-733, September.
    12. Parantap Basu & Yoseph Getachew, 2020. "Redistributive innovation policy, inequality, and efficiency," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 532-554, June.
    13. Dimitrios Paparas & Christian Richter, 2015. "Fiscal policy and economic growth: Empirical evidence from the European Union," Working Papers 2015.06, International Network for Economic Research - INFER.
    14. Li, Y. & Murshed, S.M. & Papyrakis, E., 2021. "Public capital and income inequality: some empirical evidence," ISS Working Papers - General Series 677, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    15. Yin Germaschewski, 2016. "Getting help from abroad: The macroeconomics of foreign direct investment in infrastructure in low‐income countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1502-1535, November.
    16. Chatterjee, Santanu & Gibson, John & Rioja, Felix, 2018. "Public investment, debt, and welfare: A quantitative analysis," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 204-217.
    17. Dimitrios PAPARAS & Christian RICHTER & Alexandros PAPARAS, 2015. "Fiscal Policy and Economic Growth, Empirical Evidence in European Union," Turkish Economic Review, KSP Journals, vol. 2(4), pages 239-268, December.
    18. Kane, Robert F. & Peretto, Pietro F., 2020. "More apples vs. better apples: Distribution and innovation-driven growth," Journal of Economic Theory, Elsevier, vol. 185(C).
    19. Bucevska Vesna, 2019. "Determinants of Income Inequality in EU Candidate Countries: A Panel Analysis," Economic Themes, Sciendo, vol. 57(4), pages 397-413, December.
    20. Julián Costas-Fernández & José-Alberto Guerra & Myra Mohnen, 2020. "Train to Opportunity: the Effect of Infrastructure on Intergenerational Mobility," Documentos CEDE 018591, Universidad de los Andes – Facultad de Economía – CEDE.

    More about this item

    Keywords

    Public infrastructure; Early-stage; Economic takeoff; Threshold; Effective tax rate;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:313-333. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.macrothink.org/journal/index.php/ber .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Technical Support Office The email address of this maintainer does not seem to be valid anymore. Please ask Technical Support Office to update the entry or send us the correct address (email available below). General contact details of provider: http://www.macrothink.org/journal/index.php/ber .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.