Monday, March 16, 2009

Does Government Infrastructure Investment Raise Economic Growth?

Twenty years from now cross-sectional empirical macroeconomists will benefit from all of the "experiments" that nations are running today as they seek the magic formula for growth. China is entering the game with its own "home improvement" projects. See the China's Big Keynesian Push. This will certainly create a lot of construction jobs. Will it have long run value added? What trade within cities and across cities will be facilitated by this investment?

How will the Chinese central authorities guard against corruption and avoid Boston Big Dig cost over-runs?

The urban economist inside me would like to know more about the spatial distribution of this Keynesian "G". Which favorite cities get a disproportionate share of this expenditure? Which cities does Beijing favor and why is this the case? Will their focus continue to be East coast cities with an emphasis on exporting to the West?