The macroeconomic effects of funding U.S. infrastructure

Malley, J. and Philippopoulos, A. (2023) The macroeconomic effects of funding U.S. infrastructure. European Economic Review, 152, 104334. (doi: 10.1016/j.euroecorev.2022.104334)

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This paper quantitatively assesses the macroeconomic effects of the recently agreed U.S. bipartisan infrastructure spending bill in a general equilibrium model with a mix of neoclassical and new-Keynesian features. We add to the relevant literature by allowing for a more detailed tax structure, different types of infrastructure spending and linkages between the final and intermediate goods sectors. We find long-run output multipliers above unity if the rising public debt, triggered by the increase in infrastructure spending, is stabilised by rises in consumption, dividend and labour income taxes and less than unity for corporate taxes. We also find that self-financing rates associated with infrastructure spending are not generally above 50% despite underprovided private and particularly public capital. Finally, a sensitivity analysis reveals that intersectoral linkages and zero-interest rate policy are critical determinants of multiplier size.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Philippopoulos, Prof Apostolis and Malley, Professor Jim
Authors: Malley, J., and Philippopoulos, A.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:European Economic Review
ISSN (Online):1873-572X
Published Online:14 November 2022
Copyright Holders:Copyright © 2022 Elsevier B.V.
First Published:First published in European Economic Review 152: 104334
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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