Public Inputs, Urban Development, and Welfare in a Developing Economy

Abstract

This paper examines the impact of urban development through the government provision of public inputs in a developing economy. When a financing constraint is taken into account, an increase in public inputs may worsen urban unemployment and hence reduce welfare of the economy. Further, the optimal level of public input provision is larger (smaller) than that under full employment, if there exits a positive (negative) employment effect.

JEL Classifications:

• F11
• O18

Keywords:

• Public inputs
• urban unemployment
• welfare