On the interaction between public investment and private capital in economic growth
This paper examines two possible sources of interaction between private and public capital in an endogenous growth model with productive public investment, which is used as an input both in the production of final output and in the production of new public capital. On the one hand ,public investment and private capital are complementary with each other in the production of goods. On the other, they can be either complementary or substitutes in the production of new productive public capital . In our model private and public capital are two reproducible productive inputs interacting with each other in goods production and in productive public capital investment. The share of public capital devoted to output production can be exogenous or endogenous, and we consider a Cobb-Douglas and a more general CES aggregate production function. Our main results are that, when the share of public capital devoted to output production is exogenous along the balanced growth path equilibrium the common growth rate is a negative function of this share and a positive function of the degree of complementarity between the two forms of capital in infrastructure capital investment. When the sectoral allocation of productive public capital is endogenous, the main determinant of the economy’s long run growth rate is, along with the model’s preferences parameters, the public capital’s share in GDP. Unlike existing literature (notably, Barro 1990), we find that the relationship linking the economy’s growth rate and the public capital’s share in GDP is U-shaped, rather than monotonically decreasing.
|Date of creation:||03 Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +39 02 50321522
Fax: +39 02 50321505
Web page: http://www.demm.unimi.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andreas Irmen & Johanna Kühnel, 2008.
"Productive Government Expenditure and Economic Growth,"
0464, University of Heidelberg, Department of Economics, revised May 2008.
- Andreas Irmen & Johanna Kuehnel, 2009. "Productive Government Expenditure And Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 692-733, 09.
- Andreas Irmen & Johanna Kuehnel, 2008. "Productive Government Expenditure and Economic Growth," CESifo Working Paper Series 2314, CESifo Group Munich.
- John Creedy & Ross Guest, 2008. "Discounting and the Time Preference Rate," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 109-127, 03.
- Shekhar Aiyar & Carl-Johan Dalgaard, 2008.
"Accounting for Productivity: Is it OK to Assume that the World is Cobb-Douglas?,"
08-14, University of Copenhagen. Department of Economics.
- Aiyar, Shekhar & Dalgaard, Carl-Johan, 2009. "Accounting for productivity: Is it OK to assume that the world is Cobb-Douglas?," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 290-303, June.
- Chiara DEL BO & Massimo FLORIO, 2008. "Infrastructure and growth in the European Union: an empirical analysis at the regional level in a spatial framework," Departmental Working Papers 2008-37, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Samuel Bentolila & Gilles Saint Paul, 1999.
"Explaining movements in the labor share,"
Economics Working Papers
374, Department of Economics and Business, Universitat Pompeu Fabra.
- Erdal Atukeren, 2005.
"Interactions Between Public and Private Investment: Evidence from Developing Countries,"
Wiley Blackwell, vol. 58(3), pages 307-330, 07.
- Erdal ATUKEREN, . "Interactions Between Public and Private Investment: Evidence from Developing Countries," EcoMod2004 330600011, EcoMod.
- Jakub Growiec, 2005.
"Fertility Choice and Semi-Endogenous Growth: Where Becker Meets Jones,"
0503001, EconWPA, revised 17 Jan 2006.
- Growiec Jakub, 2006. "Fertility Choice and Semi-Endogenous Growth: Where Becker Meets Jones," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(2), pages 1-25, September.
- GROWIEC, Jakub, 2006. "Fertility choice and semi-endogenous growth: where Becker meets Jones," CORE Discussion Papers 2006023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Miguel D. Ramirez & Nader Nazmi, 2003. "Public Investment and Economic Growth in Latin America: an Empirical Test," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 115-126, February.
- Kaz Miyagiwa & Chris Papageorgiou, 2003.
"Elasticity of substitution and growth: normalized CES in the Diamond model,"
Springer, vol. 21(1), pages 155-165, 01.
- Chris Papageorgiou & Kaz Miyagiwa, . "Elasticity of Substitution and Growth: Normalized CES in the Diamond Model," Departmental Working Papers 2001-05, Department of Economics, Louisiana State University.
- Miguel Ramirez, 2000. "The impact of public investment on private investment spending in Latin America: 1980–95," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(2), pages 210-225, June.
- David E. Bloom & David Canning & Jaypee Sevilla, 2001. "The Effect of Health on Economic Growth: Theory and Evidence," NBER Working Papers 8587, National Bureau of Economic Research, Inc.
- Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
When requesting a correction, please mention this item's handle: RePEc:mil:wpdepa:2009-44. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEMM Working Papers)
If references are entirely missing, you can add them using this form.