Delays in Public Goods
Chatterjee, Santanu; Posch, Olaf; Wesselbaum, Dennis

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Chatterjee, S., Posch, O., & Wesselbaum, D. (2017). Delays in Public Goods (Economics Discussion Papers Series No. 1702). University of Otago. Retrieved from http://hdl.handle.net/10523/7045
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/7045
Abstract:
In this paper, we analyze the consequences of delays and cost overruns typically
associated with the provision of public infrastructure in the context of a growing economy.
Our results indicate that uncertainty about the arrival of public capital can more
than offset its positive spillovers for private-sector productivity. In a decentralized
economy, unanticipated delays in the provision of public capital generate too much
consumption and too little private investment relative to the first-best optimum. The
characterization of the first-best optimum is also affected: facing delays in the arrival
of public goods, a social planner allocates more resources to private investment and
less to consumption relative to the first-best outcome in the canonical model (without
delays). The presence of delays also lowers equilibrium growth, and leads to a diverging
growth path relative to that implied by the canonical model. This suggests that delays
in public capital provision may be a potential determinant of cross-country differences
in income and economic growth.
Date:
2017-02
Publisher:
University of Otago
Series number:
1702
ISSN:
1178-2293
Keywords:
Public goods; delays; time overrun; cost overrun; implementation lags; fiscal policy; economic growth
Research Type:
Discussion Paper
Languages:
English
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- Economics [325]
- Discussion Paper [447]
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