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Public Investment and GDP Growth in Developing and Advanced Countries: A Panel Data Analysis

Author

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  • Hicham GOUMRHAR

    (Mohammed V University of Rabat, Faculty of Economics & Law, Agdal Applied Economics Lab., Morocco.)

  • Youssef OUKHALLOU

    (Mohammed V University of Rabat, Faculty of Economics & Law, Agdal Applied Economics Lab., Morocco.)

Abstract

This research paper examines the differences between developing and advanced countries in terms of public investment’s impact on economic growth. In this regard, we investigate whether or not the macroeconomic impact of government investment spending is tributary to the degree of private-public capital substitutability and the level of the capital-to-GDP ratio. In this perspective, we use a panel data model for two groups of countries that include respectively five advanced economies and five developing ones. Our study provides empirical evidence that public investment expenditures have a larger influence on GDP’s evolution in developing countries. Our results also suggest that public investment spending is relatively counterproductive in advanced economies, most likely because of high levels of crowding out; the latter are driven by public-private capital substitutability and the advanced position of these countries in terms of transitional dynamics. The analysis in this paper also sheds the light on efficiency, as a concept that is significantly linked to the level of corruption.

Suggested Citation

  • Hicham GOUMRHAR & Youssef OUKHALLOU, 2017. "Public Investment and GDP Growth in Developing and Advanced Countries: A Panel Data Analysis," Journal of Economics Bibliography, KSP Journals, vol. 4(1), pages 77-86, March.
    • Handle: RePEc:ksp:journ6:v:4:y:2017:i:1:p:77-86
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    References listed on IDEAS

    as
    1. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    2. Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
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    More about this item

    Keywords

    GDP growth; Public investment; Crowding out; Panel data.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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