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On the optimality of public capital for long-run economic growth: evidence from panel data

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  • Nigel James Miller
  • Christopher Tsoukis

Abstract

The role of public capital in economic growth is examined using data from the Penn World Tables and other sources on a large number of countries. Drawing on intertemporal optimization, the theoretical framework nests the exogenous (Solow) and endogenous types of growth and is data-consistent. It is found that public capital makes a significant contribution to growth. The actual level of investment on public capital is suboptimal. Growth in recent decades can be characterized as 'endogenous' with little sign of convergence. There is evidence of a growth slow-down between the 1970s and 1980s. Human capital also significantly enhances growth.

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  • Nigel James Miller & Christopher Tsoukis, 2001. "On the optimality of public capital for long-run economic growth: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 33(9), pages 1117-1129.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:9:p:1117-1129
    DOI: 10.1080/00036840010003258
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    1. Emanuela Marrocu & Raffaele Paci, 2010. "The effects of public capital on the productivity of the Italian regions," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 989-1002.
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    3. Fosu, Augustin Kwasi & Getachew, Yoseph Yilma & Ziesemer, Thomas H.W., 2016. "Optimal Public Investment, Growth, And Consumption: Evidence From African Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 20(8), pages 1957-1986, December.
    4. Teweldemedhin, M.Y. & van Schalkwyk, Herman D., 2010. "The impact of trade liberalisation on South African agricultural productivity," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95963, African Association of Agricultural Economists (AAAE).
    5. Getachew, Yoseph Yilma, 2010. "Public capital and distributional dynamics in a two-sector growth model," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 606-616, June.
    6. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    7. Maria Abreu & Henri L.F. de Groot & Raymond J.G.M. Florax, 2005. "A Meta-Analysis of Beta-Convergence: The Legendary Two-Percent," Tinbergen Institute Discussion Papers 05-001/3, Tinbergen Institute.
    8. Naveed H. Naqvi & Christopher Tsoukis, 2003. "Does Public Investment Crowd Out Private Investment? Evidence On Investment And Growth In Asia, 1971-2000," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 65-80, January -.
    9. Manh Vu LE & Terukazu Suruga, 2005. "The Effects of FDI and Public Expenditure on Economic Growth: From Theoretical Model to Empirical Evidence," GSICS Working Paper Series 2, Graduate School of International Cooperation Studies, Kobe University.
    10. Fedderke, J.W. & Bogetic, Z., 2009. "Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures," World Development, Elsevier, vol. 37(9), pages 1522-1539, September.
    11. Silvia Bertarelli, 2006. "Public capital and growth," Politica economica, Società editrice il Mulino, issue 3, pages 361-398.
    12. Maria Abreu & Henri L. F. de Groot & Raymond J. G. M. Florax, 2005. "A Meta‐Analysis of β‐Convergence: the Legendary 2%," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 389-420, July.
    13. Wang, Chao & Kim, Yul-Seong & Kim, Chi Yeol, 2021. "Causality between logistics infrastructure and economic development in China," Transport Policy, Elsevier, vol. 100(C), pages 49-58.
    14. Melvin Ayogu, 0. "Infrastructure and Economic Development in Africa: A Review-super- †," Journal of African Economies, Centre for the Study of African Economies, vol. 16(suppl_1), pages -126.
    15. Asian Development Bank & World Bank & Japan Bank for International Cooperation, 2005. "Connecting East Asia : A New Framework for Infrastructure," World Bank Publications - Books, The World Bank Group, number 7267, December.
    16. Agenor, Pierre-Richard & Nabli, Mustapha K. & Yousef, Tarik M., 2005. "Public infrastructure and private investment in the Middle East and North Africa," Policy Research Working Paper Series 3661, The World Bank.
    17. Augustin Kwasi Fosu & Yoseph Getachew & Thomas H.W. Ziesemer, 2014. "Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries," Working Papers 201464, University of Pretoria, Department of Economics.
    18. Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.
    19. Mr. H. Takizawa & Mr. E. H. Gardner & Mr. Kenichi Ueda, 2004. "Are Developing Countries Better Off Spending Their Oil Wealth Upfront?," IMF Working Papers 2004/141, International Monetary Fund.
    20. Yoseph Yilma Getachew, 2011. "Public Investment Policy, Distribution, and Growth: What Levels of Redistribution through Public Investment Maximize Growth?," DEGIT Conference Papers c016_072, DEGIT, Dynamics, Economic Growth, and International Trade.
    21. Ibrahim B. Kamara, 2007. "The Direct Productivity Impact of Infrastructure Investment: Dynamic Panel Data Evidence From Sub Saharan Africa," Working Papers 048, Economic Research Southern Africa.
    22. Phillip Anthony O’Hara, 2013. "Policies and Institutions for Moderating Deep Recessions, Debt Crises and Financial Instabilities," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(1), pages 19-49, March.
    23. Tsoukis, Chris & Miller, Nigel J., 2003. "Public services and endogenous growth," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 297-307, April.

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