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INVESTING IN PUBLIC INFRASTRUCTURE: ROADS OR SCHOOLS?

Macroeconomic dynamics, 2021-10, Vol.25 (7), p.1892-1921 [Peer Reviewed Journal]

Cambridge University Press 2019 ;ISSN: 1365-1005 ;EISSN: 1469-8056 ;DOI: 10.1017/S1365100519000907

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  • Title:
    INVESTING IN PUBLIC INFRASTRUCTURE: ROADS OR SCHOOLS?
  • Author: Atolia, Manoj ; Li, Bin Grace ; Marto, Ricardo ; Melina, Giovanni
  • Subjects: Politics
  • Is Part Of: Macroeconomic dynamics, 2021-10, Vol.25 (7), p.1892-1921
  • Description: Why do governments in developing economies favor roads rather than schools in public investment scale-ups? We study this question using a dynamic general equilibrium model and argue that the different pace at which roads and schools contribute to economic growth, public debt intolerance, and political myopia are central to this decision. In a thought experiment with a large return differential in favor of schools, a benevolent government would intuitively devote the majority of an investment scale-up to them. However, the fraction of schools chosen by the government falls with increasing levels of debt intolerance and political myopia. In particular, political myopia is a meaningful explanation for the observed result to the extent that an extremely myopic government would not invest in schools at all.
  • Publisher: New York, USA: Cambridge University Press
  • Language: English
  • Identifier: ISSN: 1365-1005
    EISSN: 1469-8056
    DOI: 10.1017/S1365100519000907
  • Source: ProQuest Central
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