Macroeconomic effects from the regional allocation of public capital formation

Resum

This paper proposes a multi-regional general equilibrium model with capital accumulation to analyze the economic impact of the spatial distribution of public capital formation. This model is solved and calibrated by using data for Spanish economy in order to simulate some comparative dynamic exercises of fiscal policy changes. These analyses illustrate the role that public investment plays in generating the existing imbalances in regional development. This is done by computing the spillover effects and the opportunity costs of regional distribution of public investment. Finally, from the two rankings of regional priorities in public investment can be derived: one based on the criterion of reducing regional disparities, and other based of an efficiency criterion.