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Do government expenditures increase private sector productivity?

Author

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  • Reino Hjerppe
  • Pellervo Hämäläinen
  • Jaakko Kiander
  • Matti Viren

Abstract

Purpose - To analyse productivity of public expenditures; especially to find out the effect of human capital investment on private sector productivity. Design/methodology/approach - Several measures of public sector capital stock are constructed. These measures are used in testing the effects on private sector productivity. Empirical analysis makes use of cross‐country panel data and utilizes various panel econometric methods. Findings - The main finding is that public sector capital has a positive impact on private sector productivity. Some evidence is provided to the hypotheses that also human capital that is generated within the public sector increases private sector productivity. Research limitations/implications - There are a lot of measurement problems with the cross‐country data. Also the non‐stationarity of data creates some estimation problems. These may have some impact on the quantitative, but perhaps not on qualitative, nature of results. Originality/value - Relatively few analysis have made in this area; this is true in particular with comparative (cross‐country) analysis.

Suggested Citation

  • Reino Hjerppe & Pellervo Hämäläinen & Jaakko Kiander & Matti Viren, 2007. "Do government expenditures increase private sector productivity?," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(5), pages 345-360, April.
    • Handle: RePEc:eme:ijsepp:v:34:y:2007:i:5:p:345-360
    DOI: 10.1108/03068290710741598
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    References listed on IDEAS

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    1. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
    2. John A. Tatom, 1991. "Should government spending on capital goods be raised?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-15.
    3. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
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    Cited by:

    1. Bimal K. Mohanty, 2010. "An Econometric Analysis of Investment Spending of a Sub-national Government in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(1), pages 79-100, January.
    2. Ibrahim, Ngouhouo & Orfe, Chouafi Nguekam & Gilbert, Noula Armand & Honore, Tekam Oumbe, 2019. "Effects of Socio-Economic Conditions on the Relationship between Public and Private investments in the CEMAC Zone," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(1), pages 1-13, March.
    3. Edward Batte Sennoga & John Mary Matovu, 2013. "Public Spending Composition in Uganda and its Implications for Growth and Poverty Reduction," Public Finance Review, , vol. 41(2), pages 227-247, March.
    4. Pellervo Hamalainen, 2009. "Review of literature on the productivity of public capital," Discussion Papers 55, Aboa Centre for Economics.

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