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Government production of investment goods and aggregate labor productivity

  • James A. Schmitz, Jr.

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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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 240.

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Date of creation: 1997
Date of revision:
Handle: RePEc:fip:fedmsr:240
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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. Thomas J. Holmes & James A. Schmitz, Jr., 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
  7. Thomas J. Holmes & James A. Schmitz, Jr., 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-17.
  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  9. 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.
  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.
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