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Public infrastructure, non‐cooperative investments, and endogenous growth
Author(s) -
Figuières Charles,
Prieur Fabien,
Tidball Mabel
Publication year - 2013
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12024
Subject(s) - endogenous growth theory , externality , economics , consumption (sociology) , public good , growth rate , developing country , monetary economics , international economics , microeconomics , market economy , economic growth , human capital , social science , geometry , mathematics , sociology
Two countries strategically invest in productive infrastructure within a general equilibrium model with endogenous growth. These public investments generate externalities. Dynamic analysis reveals that: (1) under constant returns, the two countries’ growth rates differ during the transition but are identical on the balanced growth path, (2) a country with decreasing returns can experience sustained growth provided that the other country grows at a positive constant rate, (3) cooperation does not necessarily lead to higher growth for each country, and it can increase or decrease the gap between countries’ growth rates depending on the countries’ consumption preferences regarding domestic and foreign goods.