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Government production of investment goods and aggregate labor productivity

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  • James A. Schmitz

Abstract

In this paper, I estimate the impact on aggregate labor productivity of having government, rather than private industry, produce investment goods. This policy was pursued to varying degrees by Egypt, India, Turkey, among others. The policy has a large impact because there is both a direct effect (on the production function in the investment sector) and a secondary effect (on the economy-wide capital stock per worker). I estimate that this policy alone accounted for about one-third of Egypt's aggregate labor productivity gap with the United States during the 1960s.

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  • James A. Schmitz, 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:240
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    References listed on IDEAS

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    1. Waterbury,John, 1993. "Exposed to Innumerable Delusions," Cambridge Books, Cambridge University Press, number 9780521434973.
    2. Thomas J. Holmes & James A. Schmitz, 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 19(Win), pages 2-17.
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    6. Krueger, Anne O. & Tuncer, Baran, 1982. "Growth of factor productivity in Turkish manufacturing industries," Journal of Development Economics, Elsevier, vol. 11(3), pages 307-325, December.
    7. James A. Schmitz, 1996. "The role played by public enterprises: how much does it differ across countries?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 20(Spr), pages 2-15.
    8. Martin Neil Baily & Hans Gersbach, 1995. "Efficiency in Manufacturing and the Need for Global Competition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995 Micr), pages 307-358.
    9. Waterbury,John, 1993. "Exposed to Innumerable Delusions," Cambridge Books, Cambridge University Press, number 9780521435499.
    10. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "The Poverty of Nations: A Quantitative Exploration," NBER Working Papers 5414, National Bureau of Economic Research, Inc.
    11. SchmitzJr, James A., 2001. "Government production of investment goods and aggregate labor productivity," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 163-187, February.
    12. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    13. Paul Wonnacott & Ronald J. Wonnacott, 1999. "An Economic Theory of the GATT: A Generalization," University of Western Ontario, Departmental Research Report Series 9901, University of Western Ontario, Department of Economics.
    14. Thomas J. Holmes & James A. Schmitz, 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
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