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Public Investment and Economic Growth in Latin America: an Empirical Test

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  • Miguel D. Ramirez

    ()
    (Trinity College, Hartford, USA)

  • Nader Nazmi

    ()
    (Lake Forest College, Chicago, USA)

Abstract

The paper analyzes the impact on economic growth of public investment spending and other relevant variables (such as human capital) for nine major Latin American nations over the 1983-93 period. The results suggest that both public and private investment spending contribute to economic growth. Overall central government consumption expenditures, on the other hand, are found to have a negative effect on private investment and growth. Finally, public expenditures on education and healthcare are found to have a positive and statistically significant effect on private capital formation and long-term economic growth. From a policy standpoint, the results suggest that indiscriminate cuts in public and private investment spending are likely to be counterproductive in the long run, and more importantly, scarce public expenditures should be channeled to the promotion of new human capital (via primary and secondary education) and the maintenance of existing human capital (through healthcare expenditures). Copyright Blackwell Publishing Ltd 2003

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 7 (2003)
Issue (Month): 1 (February)
Pages: 115-126

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Handle: RePEc:bla:rdevec:v:7:y:2003:i:1:p:115-126

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Cited by:
  1. Muhammad Iftikhar ul Husnain, 2010. "Expenditure-Growth Nexus: Does the Source of Finance Matter? Empirical Evidence from Selected South Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 631–640.
  2. Andrew Sumner & Meera Tiwari, 2005. "Poverty and economic policy: what happens when researchers disagree?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(6), pages 791-801.
  3. Alberto Bucci & Chiara Del Bo, 2012. "On the interaction between public and private capital in economic growth," Journal of Economics, Springer, vol. 106(2), pages 133-152, June.
  4. Alberto Bucci & Chiara Del Bo, 2010. "On the Interaction between Public Investment and Private Capital in Economic Growth," DEGIT Conference Papers c015_007, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. Harvie, Charles & Saleh, Ali Salman, 2007. "Lebanon’s Fiscal Crisis and Economic Reconstruction after War: the case of a bridge too far?," Economics Working Papers wp07-04, School of Economics, University of Wollongong, NSW, Australia.
  6. Rodriguez-Oreggia, Eduardo & Rodriguez-Pose, Andres, 2004. "The Regional Returns of Public Investment Policies in Mexico," World Development, Elsevier, vol. 32(9), pages 1545-1562, September.
  7. Guillermo E. Perry & Omar S. Arias & J. Humberto López & William F. Maloney & Luis Servén, 2006. "Poverty Reduction and Growth : Virtuous and Vicious Circles," World Bank Publications, The World Bank, number 6997, October.
  8. Ramirez, Miguel D., 2003. "Mexico under NAFTA: a critical assessment," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(5), pages 863-892.
  9. Bianca Clausen, 2008. "Real Effective Exchange Rate Uncertainty, Threshold Effects, and Aggregate Investment – Evidence from Latin American Countries," IWP Discussion Paper Series 02/2008, Institute for Economic Policy, Cologne, Germany.

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