2008) Public capital maintenance and congestion: Long-run growth and policies

In this paper we study the equilibrium properties of an endogenous growth model, in which pub-lic maintenance expenditures affect the depreciation rate of public capital and the latter is subject to congestion. We find that a threshold level of public expenditures has to be devoted to public capital maintenance in order for the economy to exhibit balanced growth. We also examine the fiscal implica-tions of public capital maintenance policies under congestion and we find that the composition of public capital expenditures is a crucial determinant of optimal and growth-maximizing fiscal policies. JEL classification: O41, H54, E62