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Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries

Author

Listed:
  • Augustin K. Fosu
  • Thomas H. W. Ziesemer
  • Yoseph Y. Getachew

Abstract

This paper develops a model positing a nonlinear relationship between pub- lic investment and growth. The model is then applied to a panel of African countries using nonlinear estimating procedures. The growth-maximizing level of public investment is estimated at about 10 percent of GDP based on System GMM estimation. The paper further runs simulations, obtaining the constant optimal public investment share that maximizes the sum of discounted con- sumption as between 8.1 percent and 9.6 percent of GDP. Compared with the observed end-of-panel mean value of no more than 7.26 percent, these estimates suggest that there has been signi?cant public under-investment in Africa.
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Suggested Citation

  • Augustin K. Fosu & Thomas H. W. Ziesemer & Yoseph Y. Getachew, 2014. "Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries," ERSA Working Paper Series 471, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:471
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    Cited by:

    1. is not listed on IDEAS
    2. Rafael Aguirre Unceta, 2018. "Niger : la Quête du Développement dans un Contexte Adverse," Working Papers hal-02046108, HAL.
    3. Rafael AGUIRRE UNCETA, 2018. "Niger : la Quête du Développement dans un Contexte Adverse," Working Papers P247, FERDI.
    4. Getachew, Yoseph Y. & Turnovsky, Stephen J., 2015. "Productive government spending and its consequences for the growth–inequality tradeoff," Research in Economics, Elsevier, vol. 69(4), pages 621-640.

    More about this item

    Keywords

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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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