
Contents
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5.1 Introduction 5.1 Introduction
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5.2 Flow Infrastructure: Growth with a Public Input 5.2 Flow Infrastructure: Growth with a Public Input
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5.2.1 The Private Economy 5.2.1 The Private Economy
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Growth Rate vs. Welfare Maximisation in a Private Economy Growth Rate vs. Welfare Maximisation in a Private Economy
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5.2.2 Command vs. Private Economy 5.2.2 Command vs. Private Economy
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5.3 Growth, Public Input and Congestion 5.3 Growth, Public Input and Congestion
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5.3.1 The Private Economy: Proportional Tax 5.3.1 The Private Economy: Proportional Tax
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5.3.2 Command Economy Optimum 5.3.2 Command Economy Optimum
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5.4 Growth with Stock Infrastructure 5.4 Growth with Stock Infrastructure
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5.4.1 The Model of a Mixed Economy 5.4.1 The Model of a Mixed Economy
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5.4.2 Existence of a Balanced Growth Equilibrium 5.4.2 Existence of a Balanced Growth Equilibrium
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5.4.3 Stability 5.4.3 Stability
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5.4.4 Command Economy vs. Mixed Economy 5.4.4 Command Economy vs. Mixed Economy
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5.4.5 A Policy Question 5.4.5 A Policy Question
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Summary Summary
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Problems Problems
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5 Chapter 5 Growth and Infrastructure
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Published:November 2010
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Abstract
Inadequate infrastructure is a serious constraint on the growth potential of developing economies. A growing economy can take advantage of any given infrastructure if the infrastructure can handle the growing demand from firms. Infrastructure growth, therefore, is correlated with economic development. Accordingly, this chapter examines the connection between infrastructure and economic growth. It introduces infrastructure in two different forms, a flow (such a clean environment) and a stock (such as public highways). It also discusses the private economy, growth rate vs. welfare maximization in a private economy, command economy vs. private economy and mixed economy, public input and congestion, proportional tax in a private economy, and balanced growth equilibrium.
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