Infrastructure Development vs Direct Cash Transfer: A General Equilibrium Comparison

Marjit, Sugata and Mandal, Biswajit and Chatterjee, Tonmoy (2016): Infrastructure Development vs Direct Cash Transfer: A General Equilibrium Comparison.

Abstract

This paper attempts to provide an explanation to the debate whether infrastructure development is more effective than direct cash transfer to reduce wage disparity between skilled and unskilled workers. We use a simple general equilibrium structure to argue that in the presence of symmetric productivity effects direct cash transfer meets the target when such transfer is financed by tax revenue collected from skilled wage bill. Nevertheless, in case of asymmetric productivity effects the arguments boil down to how different sectors absorb infrastructural facility to improve their productivity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Infrastructure, Redistribution, Personnel income tax, General Equilibrium
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium; F - International Economics > F1 - Trade; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock

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