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We want to explore the role of infrastructure in economic growth by modeling infrastructure as productive public capital in a Solow-style model. The key
We want to explore the role of infrastructure in economic growth by modeling infrastructure as productive public capital in a Solow-style model. The key departure from the textbook version is that public capital, G, enhances total factor productivity (TFP). In particular, start with simple aggregate production technology Y = AKON- A = G 0 0 in the positive steady state and describe how it depends on the tax rater. Explain the intuition behind it. e) What tax rate * should the government choose if it wants to maximize GDP in the positive steady state? Explain the intuition behind it.
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a The private capital is equal to the private savings and given as Kt It 1T Yt The government spend...Get Instant Access to Expert-Tailored Solutions
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