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Infrastructure Development vs Direct Cash Transfer: A General Equilibrium Comparison

Author

Listed:
  • Marjit, Sugata
  • Mandal, Biswajit
  • Chatterjee, Tonmoy

Abstract

This paper attempts to provide an explanation to the debate whether infrastructure development is more effective than direct cash transfer to reduce wage disparity between skilled and unskilled workers. We use a simple general equilibrium structure to argue that in the presence of symmetric productivity effects direct cash transfer meets the target when such transfer is financed by tax revenue collected from skilled wage bill. Nevertheless, in case of asymmetric productivity effects the arguments boil down to how different sectors absorb infrastructural facility to improve their productivity.

Suggested Citation

  • Marjit, Sugata & Mandal, Biswajit & Chatterjee, Tonmoy, 2016. "Infrastructure Development vs Direct Cash Transfer: A General Equilibrium Comparison," MPRA Paper 73126, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:73126
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    File URL: https://mpra.ub.uni-muenchen.de/73126/1/MPRA_paper_73126.pdf
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    References listed on IDEAS

    as
    1. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    2. Ahmed, Vaqar & Abbas, Ahsan & Ahmed, Sofia, 2013. "Public Infrastructure and economic growth in Pakistan: a dynamic CGE-microsimulation analysis," PEP Working Papers 164414, Partnership for Economic Policy (PEP).
    3. Sahoo, Pravakar & Dash, Ranjan Kumar & Nataraj, Geethanjali, 2010. "Infrastructure development and economic growth in China," IDE Discussion Papers 261, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Infrastructure; Redistribution; Personnel income tax; General Equilibrium;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • F1 - International Economics - - Trade
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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