Public capital, asymmetric information, and economic growth
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
Original language | English |
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Pages (from-to) | 57-80 |
Journal / Publication | Canadian Journal of Economics |
Volume | 38 |
Issue number | 1 |
Publication status | Published - Feb 2005 |
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Abstract
We investigate the provision of public capital in an endogenous growth model with asymmetric information. In a credit market with costly screening, we show that the equilibrium contracts are characterized by the self-selection of borrowers. Through identifying an additional adverse effect of taxation on growth, we show that the optimal tax rate in our model is smaller than the output elasticity of public capital. Therefore, our analysis justifies a more conservative tax policy in the presence of asymmetric information. Furthermore, our model suggests a number of implications that appear to be well supported by preliminary evidence in cross-country data. © Canadian Economics Association.
Citation Format(s)
Public capital, asymmetric information, and economic growth. / Ho, Wai-Hong; Wang, Yong.
In: Canadian Journal of Economics, Vol. 38, No. 1, 02.2005, p. 57-80.Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review