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Infrastructure Investment and Maintenance Expenditure: Optimal Allocation Rules in a Growing Economy

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  • P R Agénor
Abstract
This paper studies the allocation of public expenditure between infrastructure investment and maintenance in an endogenous growth framework. In the basic model maintenance affects both the durability and efficiency of public capital. The balanced growth path is derived and transitional dynamics associated with a revenue-neutral increase in spending on maintenance are analyzed. The growth-maximizing tax rate and share of infrastructure investment are then obtained. The model is then extended to account for the possibility that public spending on maintenance affects also the durability of private capital. Implications for optimal policies are also analyzed.

Suggested Citation

  • P R Agénor, 2005. "Infrastructure Investment and Maintenance Expenditure: Optimal Allocation Rules in a Growing Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 60, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:60
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    References listed on IDEAS

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    Cited by:

    1. Tamai, Toshiki, 2016. "Public investment, the rate of return, and optimal fiscal policy in a stochastically growing economy," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 1-17.
    2. Gokcen Yilmaz, 2018. "Composition of public investment and economic growth: evidence from Turkish provinces, 1975-2001," Public Sector Economics, Institute of Public Finance, vol. 42(2), pages 187-214.
    3. Ken Tabata, 2021. "Patent protection and public capital accumulation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 154-190, February.
    4. F. J. Escribá‐Pérez & M. J. Murgui‐García & J. R. Ruiz‐Tamarit, 2023. "Endogenous capital stock and depreciation in the United States," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 139-167, February.
    5. John Gibson & Felix Rioja, 2017. "Public Infrastructure Maintenance And The Distribution Of Wealth," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 175-186, January.
    6. Samir SAIDI, 2016. "Impact of road transport on foreign direct investment and economic growth: Empirical evidence from simultaneous equations model," E3 Journal of Business Management and Economics., E3 Journals, vol. 7(2), pages 064-071.
    7. Margaret Bock & Benjamin Blemings, 2024. "Road maintenance over the local election cycle," Public Choice, Springer, vol. 198(1), pages 129-151, January.
    8. -, 2013. "Perspectivas económicas de América Latina 2014: logística y competitividad para el desarrollo," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1504 edited by Ocde.
    9. Cavalcanti, Carlos B. & Marrero, Gustavo A. & Le, Tuan Minh, 2014. "Measuring the impact of debt-financed public investment," Policy Research Working Paper Series 6766, The World Bank.
    10. Dennis Gaus & Heike Link, 2020. "Economic Effects of Transportation Infrastructure Quantity and Quality: A Study of German Counties," Discussion Papers of DIW Berlin 1848, DIW Berlin, German Institute for Economic Research.
    11. Gupta, Sanjeev & Kangur, Alvar & Papageorgiou, Chris & Wane, Abdoul, 2014. "Efficiency-Adjusted Public Capital and Growth," World Development, Elsevier, vol. 57(C), pages 164-178.
    12. Chen, Jiandong & Yu, Jie & Shen, Zhiyang & Song, Malin & Zhou, Ziqi, 2023. "Debt financing and maintenance expenditure: Theory and evidence on government-operated toll roads in China," Economic Systems, Elsevier, vol. 47(1).
    13. Vetlov, Igor & Ferdinandusse, Marien & de Jong, Jasper & Funda, Josip, 2017. "The effect of public investment in Europe: a model-based assessment," Working Paper Series 2021, European Central Bank.
    14. Shi, Hao & Huang, Shaoqing, 2014. "How Much Infrastructure Is Too Much? A New Approach and Evidence from China," World Development, Elsevier, vol. 56(C), pages 272-286.

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