Working Paper #2014-057
Optimal public investment, growth, and consumption: Fresh evidence from African countries
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.
- Keywords
-
- Public investment
- Economic Growth
- Nonlinearity
- JEL codes
-
- O11
- O41
- O55
- H41
Cite this as
APA 7th ed.Kwasi Fosu, A., Getachew, Y. Y., & Ziesemer, T. (2014). Optimal public investment, growth, and consumption: Fresh evidence from African countries (UNU-MERIT Working Paper No. 2014-057). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=5500