Augustin Fosu
Optimal public investment, growth, and consumption : evidence from African countries
Fosu, Augustin; Getachew, Yoseph; Ziesemer, Thomas
Authors
Yoseph Getachew
Thomas Ziesemer
Abstract
How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of SSA countries. It develops and estimates a model that posits a nonlinear relationship between public investment and growth, to determine the growth-maximizing public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs simulation and examines the public investment GDP share that maximizes consumption. This is estimated to be between 8.4 percent and 11.0 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings
Citation
Fosu, A., Getachew, Y., & Ziesemer, T. (2012). Optimal public investment, growth, and consumption : evidence from African countries
Working Paper Type | Working Paper |
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Publication Date | Feb 19, 2012 |
Deposit Date | Dec 7, 2012 |
Publicly Available Date | Dec 7, 2012 |
Series Title | Durham University Business School Economics Finance Accounting Working Papers |
Keywords | Public investment, Economic growth, Nonlinearity: JEL classifcation: H4. |
Public URL | https://durham-repository.worktribe.com/output/1699586 |
Publisher URL | http://www.dur.ac.uk/business/faculty/working-papers/ |
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