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The Quality of Public Investment

  • Shankha Chakraborty
  • Era Dabla-Norris

This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth. The model provides potential explanations for the contradictory empirical results on the effects of public investment found in the literature as well as for the role of the quality of public infrastructure investment in creating a gap between rich and poor countries. From a policy perspective, the paper suggests that the link between public investment and growth depends critically on the quality and efficiency of public capital.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/154.

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Length: 23
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/154
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  1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  3. Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers 2/2005, European Investment Bank, Economics Department.
  4. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  5. Fisher, Walter H & Turnovsky, Stephen J, 1998. "Public Investment, Congestion, and Private Capital Accumulation," Economic Journal, Royal Economic Society, vol. 108(447), pages 399-413, March.
  6. Keith Blackburn & Niloy Bose & M. Emranul Haque, 2011. "Public Expenditures, Bureaucratic Corruption And Economic Development," Manchester School, University of Manchester, vol. 79(3), pages 405-428, 06.
  7. Stephane Straub, 2008. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," ESE Discussion Papers 178, Edinburgh School of Economics, University of Edinburgh.
  8. Pritchett, Lant, 2000. "The tyranny of concepts - CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital," Policy Research Working Paper Series 2341, The World Bank.
  9. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  10. Acemoglu, Daron & Verdier, Thierry, 1998. "Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach," Economic Journal, Royal Economic Society, vol. 108(450), pages 1381-1403, September.
  11. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, vol. 70(2), pages 443-477, April.
  12. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
  13. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh.
  14. Dal Bo, Ernesto & Rossi, Martin A., 2007. "Corruption and inefficiency: Theory and evidence from electric utilities," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 939-962, June.
  15. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  16. Paolo Mauro, 2004. "The Persistence of Corruption and Slow Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1.
  17. Andvig, J.C. & Ove Moene, K., 1988. "How Corruption May Corrupt," Memorandum 20/1988, Oslo University, Department of Economics.
  18. Era Dabla-Norris & Scott Freeman, 2004. "Enforcement of Property Rights and Underdevelopment," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 391-405, 08.
  19. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  20. K Blackburn & G Forgues-Puccio, 2005. "Public Expenditures, Bureaucratic Corruption and Economic Development," Centre for Growth and Business Cycle Research Discussion Paper Series 54, Economics, The Univeristy of Manchester.
  21. Pierre-Daniel G. Sarte, 1998. "Rent seeking bureaucracies and oversight in a simple growth model," Working Paper 98-03, Federal Reserve Bank of Richmond.
  22. Duggal, Vijaya G. & Saltzman, Cynthia & Klein, Lawrence R., 2007. "Infrastructure and productivity: An extension to private infrastructure and it productivity," Journal of Econometrics, Elsevier, vol. 140(2), pages 485-502, October.
  23. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
  24. Charles R. Hulten & Esra Bennathan & Sylaja Srinivasan, 2006. "Infrastructure, Externalities, and Economic Development: A Study of the Indian Manufacturing Industry," World Bank Economic Review, World Bank Group, vol. 20(2), pages 291-308.
  25. K Blackburn & R Sarmah, 2005. "Public Expenditures, Bureaucratic Corruption and Economic Development," Centre for Growth and Business Cycle Research Discussion Paper Series 55, Economics, The Univeristy of Manchester.
  26. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  27. José Pineda & Francisco Rodríguez, 2006. "Public Investment in Infrastructure and Productivity Growth: Evidence from the Venezuelan Manufacturing Sector," Wesleyan Economics Working Papers 2006-010, Wesleyan University, Department of Economics.
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