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Public Capital, Growth and Welfare:
Analytical Foundations for Public Policy
Pierre-Richard Agénor

Book Description | Reviews
Introduction [in PDF format]

TABLE OF CONTENTS:

Introduction and Overview 1

1 Basic Channels 11
1 Background 11
1.1 Productivity and Cost of Private Inputs 11
1.2 Complementarity Effect on Private Investment 14
1.3 Crowding-Out Effects 15
2 The Economy 16
2.1 Households 17
2.2 Firms 20
2.3 Government 23
2.4 Market-Clearing Conditions 25
3 Equilibrium and the Balanced Growth Path 26
3.1 The Case Where µ = 1 27
3.2 The Case Whereµ<1 28
4 Growth Effects of Public Policy 32
5 Optimal Fiscal Policy 34
6 Extensions 37
6.1 Indirect Taxation 37
6.2 Complementarity Effect 38
6.3 Public Capital and Household Utility 39
6.4 Partial Depreciation and Maintenance 40
6.4.1 Partial Depreciation 40
6.4.2 The Investment-Maintenance Trade-Off 41
Appendix: Optimal Policy underWelfare Maximization 45

2 Public Capital and Education 49
1 Background 49
2 The Economy 51
2.1 Households 51
2.2 Production of Goods 52
2.3 Production of Human Capital 53
2.4 Government 54
2.5 Savings-Investment Balance 55
3 Equilibrium and the Balanced Growth Path 55
3.1 The Case Where µ = 1 57
3.2 The Case Whereµ<1 59
4 Sensitivity of Education Technology 62
5 Public Policy 63
5.1 Increase in Public Spending 63
5.2 Optimal Expenditure Allocation 64
6 Extensions 65
6.1 Endogenous Rearing Costs 65
6.2 Time Allocation and Infrastructure 66
6.3 Schooling Quality 67
Appendix: Stability Conditions and Steady-State Effects withµ<1 69

3 Public Capital and Health 72
1 Background 73
1.1 Health and Economic Growth 73
1.2 Infrastructure and Health 75
1.3 Health Persistence 78
2 A Two-Period Framework 79
2.1 Households 79
2.2 Production of Goods 81
2.3 Health Status and Productivity 81
2.4 Government 83
2.5 Savings-Investment Balance 83
3 Time Allocation and Growth Dynamics 84
4 Public Spending, Growth, and Human Welfare 88
5 Optimal Spending Allocation 89
6 A Three-Period Framework with Endogenous Fertility 91
7 Endogenous Life Expectancy 100
8 Interactions between Health and Education 104
8.1 Impact of Health on Education 104
8.2 Impact of Education on Health 106
8.3 Magnification Effect 107
Appendix: Stability Conditions with Health Persistence 110

4 Public Capital and Innovation 111
1 Background 112
2 The Economy 113
2.1 Households 114
2.2 Production of the Final Good 114
2.3 Production of Intermediate Goods 116
2.4 Human Capital Accumulation 117
2.5 Research and Development Sector 117
2.6 Government 119
2.7 Savings-Investment Balance 119
2.8 Labor Market 119
3 Balanced Growth Path 120
4 Public Policy 121
4.1 Basic Intuition 121
4.2 Numerical Illustration 122
5 From Imitation to True Innovation 124
Appendix: Dynamic System and the Steady State 128

5 Public Capital and Women's Time Allocation 132
1 Background 133
1.1 Women's Time Allocation Constraints 133
1.1.1 Transportation 134
1.1.2 Water and Sanitation 134
1.1.3 Electricity 135
1.2 Intergenerational Health Externalities 136
1.2.1 Mothers' Health Status and Child Development 136
1.2.2 Mothers' Educational Status and Child Development 137
1.3 Analytical Implications 139
2 The Economy 139
2.1 Family's Utility and Income 141
2.2 Home Production 143
2.3 Market Production 143
2.4 Human Capital Accumulation 144
2.5 Health Status and Productivity 145
2.6 Government 146
2.7 Savings-Investment Balance 147
3 Women's Time Allocation and Fertility 148
4 The Balanced Growth Path 150
5 Public Policy 154
6 Women's Labor Supply and Development 156
7 Extensions 158
7.1 Public Capital and Gender Gaps 158
7.2 Nonunitary Household Framework 158
Appendix: Solution, Stability Conditions, and Steady-State Effects 163

6 Public Capital and Poverty Traps 174
1 Background 174
2 The Economy 177
2.1 Individuals 177
2.2 Firms 177
2.3 Government 178
2.4 Savings-Investment Balance 178
3 Balanced Growth Path 178
4 Network Externalities 179
5 The Big Push 182
6 Other Channels 184
6.1 Time Allocation 184
6.2 Health-Induced Poverty Traps 184
6.3 Technology Choice 186
7 Aid Volatility and Time to Build 188

7 Research Perspectives 192
1 Heterogeneous Infrastructure Assets 192
2 Political Economy of Government Spending Allocation 193
3 Excludable Public Goods 195
4 Debt, Public Capital, and Fiscal Rules 196
5 Spatial Dimensions of Public Capital 203
6 Infrastructure and Trade 206
7 Public-Private Partnerships 207
8 Public Capital and Income Distribution 209
9 Negative Externalities 212
10 Testing for the Impact of Public Capital on Growth 215

Lessons for Public Policy 219
References 225
Index 247

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File created: 11/11/2014

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