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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

    as
    1. Thomas J. Holmes & James A. Schmitz, 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-17.
    2. repec:bin:bpeajo:v:24:y:1993:i:1993-2m:p:71-159 is not listed on IDEAS
    3. Funkhouser, Richard & MacAvoy, Paul W., 1979. "A sample of observations on comparative prices in public and private enterprises," Journal of Public Economics, Elsevier, vol. 11(3), pages 353-368, June.
    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    5. 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.
    6. James A. Schmitz, 1996. "The role played by public enterprises: how much does it differ across countries?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-15.
    7. repec:bin:bpeajo:v:26:y:1995:i:1995-3:p:307-358 is not listed on IDEAS
    8. 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.
    9. 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.
    10. 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.
    11. Diego Restuccia & Carlos Urrutia, 1999. "Public Policy, Price Distortions, and Investment Rates," UWO Department of Economics Working Papers 9901, University of Western Ontario, Department of Economics.
    12. 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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    Keywords

    Labor productivity;

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