Abstract
The purpose of this paper is to consider a partial equilibrium model for a sustainable infrastructure investment in a labor-production economy. We consider an inter-temporal Stackelberg game in a "capital primitive" economy where all capital investments are made by a Central Agency (a government). The government is assumed to have a number of objectives including sustainability of the infrastructure investments, while firms are assumed to be myopic, maximizing only current profits and paying taxes as a function of their returns. Both open-loop and closed-loop (feedback) Stackelberg strategies are considered. Based on the analysis of the investment game, some conclusions are drawn regarding the propensity to invest as a function of sustainability constraints, the taxation rates and employment levels. We then show that investments can tend to a constant level and thus strategic government goals of sustainability and employment growth can be planned only if labor costs and the general price index are steady or characterized by a set of conditions ensuring the attainability of the steady-state investment.
Original language | English (US) |
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Pages (from-to) | 876-886 |
Number of pages | 11 |
Journal | International Journal of Production Economics |
Volume | 113 |
Issue number | 2 |
DOIs | |
State | Published - Jun 2008 |
Keywords
- Infrastructure
- Investment
- Stackelberg equilibrium
ASJC Scopus subject areas
- General Business, Management and Accounting
- Economics and Econometrics
- Management Science and Operations Research
- Industrial and Manufacturing Engineering