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Economic Growth Effects of Public and Private Investment: Evidence from Dynamic Panel Estimation for Developed and Developing Countries

Author

Listed:
  • Taner Turan
  • Halit Yanikkaya
  • Hüseyin A. Özer

Abstract

We examine the growth effects of public and private investment by using data for a large sample of countries. For the full sample, our dynamic panel estimations indicate that both public and private investment have strong positive effects on growth. Our estimations for income levels also show that the impacts of both public and private investment are positive and statistically significant for developing countries. Interestingly, public and private investment promote growth in developing countries with effective and ineffective governments. It seems that countries can significantly benefit from investment regardless of their institutional quality levels. Furthermore, the effect of public investment generally appears to be larger than that of private investment. Given the robust relationship between investment and growth in both ineffective and effective developing countries, an important policy implication of our study is that both types of investment should be encouraged to foster economic growth.

Suggested Citation

  • Taner Turan & Halit Yanikkaya & Hüseyin A. Özer, 2021. "Economic Growth Effects of Public and Private Investment: Evidence from Dynamic Panel Estimation for Developed and Developing Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(5), pages 613-631.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:5:id:781:p:613-631
    DOI: 10.18267/j.pep.781
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    More about this item

    Keywords

    Growth; public and private investment; GMM; developing and developed countries; institutions;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • 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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