This chapter 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. The theoretical results are confirmed by numerical simulations.
Chao, C.-C., Laffargue, J.-P. and Yu, E.S.H. (2008), "Chapter 15 Public Inputs, Urban Development, and Welfare in a Developing Economy", Marjit, S. and Yu, E.S.H. (Ed.) Contemporary and Emerging Issues in Trade Theory and Policy (Frontiers of Economics and Globalization, Vol. 4), Emerald Group Publishing Limited, Bingley, pp. 297-314. https://doi.org/10.1016/S1574-8715(08)04015-3
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