Access to public capital and economic growth

According to folk wisdom, public infrastructure (public capital) investments played an important role in the rise of China to be the second-largest economy. Interestingly China initially limited access to public capital to a subset of the population, and later expanded access to others as the economy grew. We develop an overlapping-generations model with intergenerational altruism, where access to public capital aects growth. In the model, when agents are initially poor (low in-come), limiting access during early stages helps reach the wealthier (high income) steady state faster, and improves welfare. Using provincial data from China, we nd that regions with stronger intergenerational altruism{inferred from the 2010 China Family Panel Survey responses{on average had higher urbanization rates (a proxy for change in access to public capital), and higher growth rates of GDP per capita, consistent with the predictions of our model.