I have a simple model with one representative household, one firm and a government. The government is represented by a simple budget constraint.
Should one consider public investment, I(pu), as government’s expenses, G, or as economy’s physical capital investment, I(k) ?
-> My first guess would be to consider I(pu) as government expenses (G), as it is done in national accounts. If so, should one deduct public capital from physical capital data, and deduct public administration gross value added from economy’s total gross value added (in order to have a “private” value added for the firm)?
FYI I do not model any production function for the government and I do not have a “public capital” variable in my model. Only taxes and expenses.
Thank you in advance for the clarification