Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155583
Authors: 
Chatterjee, Santanu
Posch, Olaf
Wesselbaum, Dennis
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6341
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.
Subjects: 
public goods
delays
time overrun
cost overrun
implementation lags
fiscal policy
economic growth
JEL: 
C61
E62
H41
O41
Document Type: 
Working Paper

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