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Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency

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  • Aschauer, David Alan

Abstract

Over the past decade, a large body of theoretical and empirical research has considered the importance of the quantity of public capital for economic growth. For the most part, the empirical results point to a positive role for public capital in determining steady state levels of output per capita and transitional growth rates. At the same time, other work has pointed out the importance of the means of financing government spending for economic growth, with the empirical results indicating a negative influence of higher government spending (proxying for a higher rate of taxation of private sector economic activities) on economic growth. Finally, there is a budding literature on the importance of the effectiveness, or efficiency, of public capital to the growth process; the limited results in the literature suggest that the effectiveness of use of the public capital stock has a meaningful positive influence on growth. This paper develops a common framework to investigate the importance of all three of these aspects of the provision of public capital for growth in output per worker. The paper includes a simple extension of the neoclassical growth model of Solow (1956) and Swan (1956), and a consideration of the relative importance of the three aspects of public capital: "how much you have," "how you pay for it," and how you use it."

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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 48 (2000)
Issue (Month): 2 (January)
Pages: 391-406

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Handle: RePEc:ucp:ecdecc:v:48:y:2000:i:2:p:391-406

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References

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  1. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S103-26, October.
  2. David Alan Aschauer, 1997. "Dynamic Output and Employment Effects of Public Capital," Macroeconomics, EconWPA 9711009, EconWPA.
  3. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(2), pages 223-51, April.
  4. Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 885, C.E.P.R. Discussion Papers.
  5. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  6. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  7. David Alan Aschauer, 1997. "Do States Optimize? Public Capital and Economic Growth," Macroeconomics, EconWPA 9711007, EconWPA.
  8. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  9. Barro, R. & Mankiw, G., 1992. "Capital Mobility in Neoclassical Models of Growth," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1615, Harvard - Institute of Economic Research.
  10. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  11. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
  12. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  13. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 942-63, September.
  14. Nonneman, Walter & Vanhoudt, Patrick, 1996. "A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(3), pages 943-53, August.
  15. David Alan Aschauer, 1997. "Output and Employment Effects of Public Capital," Economics Working Paper Archive wp_190, Levy Economics Institute.
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  1. Dig We Must
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Cited by:
  1. repec:wii:bpaper:bowp:060 is not listed on IDEAS
  2. Amanda Carmignani & Francesco Bripi & Raffaela Giordano, 2011. "The quality of public services in Italy," Questioni di Economia e Finanza (Occasional Papers), Bank of Italy, Economic Research and International Relations Area 84, Bank of Italy, Economic Research and International Relations Area.
  3. Carmela Martín & Ismael Sanz, 2003. "Real Convergence and European Integration: The Experience of the Less Developed EU Members," Empirica, Springer, Springer, vol. 30(3), pages 205-236, September.
  4. Kwasi Fosu, Augustin & Getachew, Yoseph Yilma & Ziesemer, Thomas, 2011. "Optimal public investment, growth, and consumption: Evidence from African countries," MERIT Working Papers 051, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Carmela Martin & Francisco J. Velazquez & Bernard Funck, 2001. "European Integration and Income Convergence : Lessons for Central and Eastern European Countries," World Bank Publications, The World Bank, number 13968, August.
  6. Pellervo Hamalainen, 2009. "Review of literature on the productivity of public capital," Discussion Papers, Aboa Centre for Economics 55, Aboa Centre for Economics.
  7. Ianchovichina, Elena & Liu, Lili & Nagarajan, Mohan, 2006. "Subnational fiscal sustainability analysis : what can we learn from Tamil Nadu ?," Policy Research Working Paper Series 3947, The World Bank.
  8. Rafaela Mª Pérez Sánchez, 2004. "Characterizing the Optimal Composition of Government Expenditures," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 0409, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  9. Mª Jesús Delgado & Inmaculada Álvarez, 2004. "Technological catch-up in the 15 European Union member states: the role of public and educational capital," European Economy Group Working Papers, European Economy Group 31, European Economy Group.
  10. Mogues, Tewodaj & Ayele, Gezahegne & Paulos, Zelekawork & Fan, Shenggen, 2006. "How Effective is Public Spending? Public Investment Composition and Rural Welfare in Ethiopia," 2006 Annual meeting, July 23-26, Long Beach, CA, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 21258, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Mila Freire & Mario Polèse & Pamela Echeverria, 2003. "Connecting Cities with Macroeconomic Concerns : The Missing Link," World Bank Publications, The World Bank, number 15058, August.
  12. Carmela Martín & Ismael Sanz, 2003. "Consequences of enlargement for European Regional Policy: the spanish viewpoint," European Economy Group Working Papers, European Economy Group 27, European Economy Group.
  13. Boopen Seetanah, 2011. "Optimal endowments of transport investment: an empirical analysis for mauritius," Empirical Economics, Springer, Springer, vol. 40(3), pages 827-838, May.
  14. Becerril-Torres, Osvaldo U. & Álvarez-Ayuso, Inmaculada C. & Del moral-Barrera, Laura E., 2010. "Do infrastructures influence the convergence of efficiency in Mexico?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(1), pages 120-137, January.
  15. Carmela Martin & Francisco J. Velazquez., 2001. "An Assessment of Real Convergence of Less Developed EU Members: Lessons for the CEEC Candidates," European Economy Group Working Papers, European Economy Group 5, European Economy Group.

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