Sectoral infrastructure investments in an unbalanced growing economy: The case of potential growth in India

Authors

Chetan Ghate, Indian Statistical Institute (Delhi Centre)
Gerhard Glomm, Indiana University Bloomington
Jialu Liu Streeter, Allegheny College

Article Type

Research Article

Publication Title

Asian Development Review

Abstract

We construct a two-sector (agriculture and modern) overlapping generations growth model calibrated to India to study the effects of sectoral tax rates, sectoral infrastructure investments, and labor market frictions on potential growth in India. Our model is motivated by the idea that because misallocation depends on distortions, policies that reduce distortions raise potential growth. We show that the positive effect of a variety of policy reforms on potential growth depends on the extent to which public and private capital are complements or substitutes. We also show that funding more infrastructure investments in both sectors by raising labor income taxes in the agriculture sector raises potential growth.

First Page

144

Last Page

166

DOI

10.1162/ADEV_a_00076

Publication Date

9-1-2016

Comments

Open Access; Gold Open Access; Green Open Access

Recommended Citation

Ghate, Chetan; Glomm, Gerhard; and Streeter, Jialu Liu, "Sectoral infrastructure investments in an unbalanced growing economy: The case of potential growth in India" (2016). Journal Articles. 4432.
https://digitalcommons.isical.ac.in/journal-articles/4432