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Public Investment and Endogenous Growth in a Small Open Economy

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  • Alogoskoufis, George
  • Kalyvitis, Sarantis C

Abstract

This paper examines the effects of three alternative rules for public investment on output growth in a model with private and public capital. The rules considered are: (i) a fixed ratio of public capital to output; (ii) a fixed growth rate for public capital; and (iii) a fixed ratio of public investment to output. We find that all these rules are closely associated with the growth rate of output and generate endogenous growth. A permanent change in the policy rule implies a new long-run growth rate of output, but the economy will only gradually approach the new steady state due to adjustment costs in private capital accumulation.

Suggested Citation

  • Alogoskoufis, George & Kalyvitis, Sarantis C, 1996. "Public Investment and Endogenous Growth in a Small Open Economy," CEPR Discussion Papers 1479, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1479
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    Citations

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    Cited by:

    1. Christodoulakis, Nicos M. & Kalyvitis, Sarantis C., 1998. "A four-sector macroeconometric model for Greece and the evaluation of the community support framework 1994-1999," Economic Modelling, Elsevier, vol. 15(4), pages 575-620, October.
    2. Rovolis, Antonis & Spence, Nigel, 1999. "Public infrastructure capital, scale economies and returns to variety," ERSA conference papers ersa99pa077, European Regional Science Association.
    3. Bouamoud Safae & Kassaoui Radouane, 2023. "Regional Public Investment and Regional Economic Growth : Study Using Spatial Econometrics Panel Data Approach [Investissement Public Régional et Croissance Economique Régionale : Etude par l'Appro," Post-Print hal-04027728, HAL.

    More about this item

    Keywords

    Adjustment Costs; Endogenous Growth; Public Private Capital;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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