Public inputs, urban development, and welfare in a developing economy

Jean-Pierre Laffargue (1, 2) , Chi-Chur Chao (3) , Eden S. H. Yu (4)

1 CES - Centre d'économie de la Sorbonne
2 PSE - Paris School of Economics
3 CUHK - The Chinese University of Hong Kong [Hong Kong]
4 CUHK - City University of Hong Kong [Hong Kong]

This paper examines the impact of urban development through the government provision of public inputs in a developing economy. When a financing constraint is taken into account, an increase in public inputs may worsen urban unemployment and hence reduce welfare of the economy. Further, the optimal level of public input provision is larger (smaller) than that under full employment, if there exits a positive (negative) employment effect. The theoretical results are confirmed by numerical simulations.

Mots clés: Public inputs; Urban unemployment; Welfare

Domaines: Economies et finances

Jean-Pierre Laffargue, Chi-Chur Chao, Eden S. H. Yu. Public inputs, urban development, and welfare in a developing economy. Sugata Marjit & Eden Yu. Contemporary and Emerging Issues in Trade Theory and Policy, Emerald, pp.297-314, 2008, Frontiers of Economics and Globalization. ⟨halshs-00645330⟩