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Modelling Government Investment and Economic Growth on a Macro Level: A Review

In: Market Behaviour and Macroeconomic Modelling

Author

Listed:
  • Jan-Egbert Sturm
  • Gerard H. Kuper
  • Jakob Haan

Abstract

During the 1970s and 1980s many OECD countries have offset increases in debt interest payments and rising social security transfers by winding back public investment. Figure 14.1 shows government investment (excluding residential buildings) as a share of GDP for 18 OECD countries over the period 1970–92. The data relate to consolidated general government and have been taken from the Standardised National Accounts compiled and published by the OECD. As follows from Figure 14.1, public capital spending as a share of GDP declined or remained stable in almost all countries between 1970 and 1992. Spain and Portugal are exceptions. In order to become more competitive within the European Union, these countries undertook extensive programmes of upgrading their stock of public capital. A small rise occurred also in Italy. Another conclusion that can be drawn from figure 14.1 is that the level of government investment spending varies considerably across countries, ranging between 1.3 per cent of GDP for the UK and 5.8 per cent for Switzerland in 1992.

Suggested Citation

  • Jan-Egbert Sturm & Gerard H. Kuper & Jakob Haan, 1998. "Modelling Government Investment and Economic Growth on a Macro Level: A Review," Palgrave Macmillan Books, in: Steven Brakman & Hans Ees & Simon K. Kuipers (ed.), Market Behaviour and Macroeconomic Modelling, chapter 14, pages 359-406, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26732-3_14
    DOI: 10.1007/978-1-349-26732-3_14
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    Keywords

    Production Function; Public Investment; Error Correction Model; Public Capital; Private Capital;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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