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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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Web page: http://www.journals.uchicago.edu/EDCC/

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References

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  1. David Alan Aschauer, 2000. "Do states optimize? Public capital and economic growth," The Annals of Regional Science, Springer, vol. 34(3), pages 343-363.
  2. 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.
  3. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  5. Barro, R.J. & Mankiw, N.G. & Sala-i-Martin, X., 1992. "Capital Mobility in Neoclassical Models of Growth," Papers 655, Yale - Economic Growth Center.
  6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  7. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  8. David Alan Aschauer, 1997. "Dynamic Output and Employment Effects of Public Capital," Macroeconomics 9711009, EconWPA.
  9. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  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. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  12. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  13. 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, vol. 111(3), pages 943-53, August.
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  1. Dig We Must
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Cited by:
  1. 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 31, European Economy Group.
  2. Amanda Carmignani & Francesco Bripi & Raffaela Giordano, 2011. "The quality of public services in Italy," Questioni di Economia e Finanza (Occasional Papers) 84, Bank of Italy, Economic Research and International Relations Area.
  3. Boopen Seetanah, 2011. "Optimal endowments of transport investment: an empirical analysis for mauritius," Empirical Economics, Springer, vol. 40(3), pages 827-838, May.
  4. Carmela Martín & Ismael Sanz, 2003. "Real Convergence and European Integration: The Experience of the Less Developed EU Members," Empirica, Springer, vol. 30(3), pages 205-236, September.
  5. 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, vol. 32(1), pages 120-137, January.
  6. Rafaela Mª Pérez Sánchez, 2004. "Characterizing the Optimal Composition of Government Expenditures," Documentos del Instituto Complutense de Análisis Económico 0409, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
  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. Carmela Martín & Ismael Sanz, 2003. "Consequences of enlargement for European Regional Policy: the spanish viewpoint," European Economy Group Working Papers 27, European Economy Group.
  9. 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 5, 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 21258, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Shankha Chakraborty & Amartya Lahiri, 2007. "Costly Intermediation And The Poverty Of Nations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 155-183, 02.
  12. Pieper,Ute, 2002. "Patterns of inter-sectoral diffusion of technological growth: income, concentration, and public capital stocks," Research Memoranda 012, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology.
  13. Mario Holzner & Vladimir Gligorov & Edward Christie, 2004. "Infrastructural Needs & Economic Development in Southeastern Europe: The Case of Rail and Road Transport Infrastructure," The wiiw Balkan Observatory Working Papers 060, The Vienna Institute for International Economic Studies, wiiw.
  14. Pellervo Hamalainen, 2009. "Review of literature on the productivity of public capital," Discussion Papers 55, Aboa Centre for Economics.

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