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


  • Augustin Kwasi Fosu, Yoseph Getachew, Thomas H.W. Ziesemer


This paper develops a model positing a nonlinear relationship between public 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 consumption 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 significant public under-investment in Africa.

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  • Augustin Kwasi Fosu, Yoseph Getachew, Thomas H.W. Ziesemer, 2014. "Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries," Working Papers 471, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:471

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    More about this item


    Public Investment and Growth; Africa;

    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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