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International Capital Mobility, Public Investment and Economic Growth

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  • Richard H. Clarida

Abstract

This paper presents a neoclassical model of international capital flows, public investment, and economic growth. Because public capital is non-traded and is imperfectly substitutable for private capital, the open economy converges only gradually to the Solow steady-state notwithstanding the fact that international capital mobility is perfect. Along the convergence path, the economy initially runs a current account deficit that reflects a consumption boom and a surge in public spending. Over time, the rate of public investment declines as does the rate of growth in the standard measure of multifactor productivity in the private sector, the Solow residual.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4506.

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Date of creation: Oct 1993
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Publication status: published as With Ronald Findlay, published as "After Maastricht: Public Investment, Economic Integration and International Capital Mobility", Economica, Vol. 61, no. 243 (1994): 319-329.
Handle: RePEc:nbr:nberwo:4506

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  1. Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  2. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-15, March.
  3. John F. Helliwell, 1992. "Trade and Technical Progress," NBER Working Papers 4226, National Bureau of Economic Research, Inc.
  4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  5. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  6. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  7. Robert Ford & Pierre Poret, 1991. "Infrastructure and Private-Sector Productivity," OECD Economics Department Working Papers 91, OECD Publishing.
  8. Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
  9. Clarida, Richard H & Findlay, Ronald, 1992. "Government, Trade, and Comparative Advantage," American Economic Review, American Economic Association, vol. 82(2), pages 122-27, May.
  10. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  11. Neil R. Ericsson, 1991. "Cointegration, exogeneity, and policy analysis: an overview," International Finance Discussion Papers 415, Board of Governors of the Federal Reserve System (U.S.).
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