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FDI, Government Budget and Efficiency of Public Infrastructure Capital

Author

Listed:
  • Vida Varahrami

    (Shahid Beheshti University, Tehran)

  • Arghavan Novin Vajari

    (Tehran University)

Abstract

This paper surveys relation between government budget, foreign direct investment (FDI) and public capital efficiency role in the infrastructure sector for attracting FDI. To achieve this goal, dynamic optimization methods are used for extracting the growth path of public consumption expenditure of government within a neoclassical growth model framework. The results suggest that FDI has a direct and positive effect on the optimal growth rate of public consumption expenditure. In fact, if the government invests more in the infrastructure sector and it is more efficient to attract FDI, the optimal growth rate of public consumption will be higher in long run respect to short run. The equation for the growth rate of public consumption is derived and estimated on the basis of data during the period 1971 - 2014 in Iran.

Suggested Citation

  • Vida Varahrami & Arghavan Novin Vajari, 2019. "FDI, Government Budget and Efficiency of Public Infrastructure Capital," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(2), pages 148-158, December.
    • Handle: RePEc:sek:jijoes:v:8:y:2019:i:2:p:148-158
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    References listed on IDEAS

    as
    1. Turnovsky, Stephen J., 1997. "Fiscal Policy In A Growing Economy With Public Capital," Macroeconomic Dynamics, Cambridge University Press, vol. 1(3), pages 615-639, September.
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    7. Khachoo, Ab Quyoom, 2012. "Determinants of FDI inflows to developing countries: a panel data analysis," MPRA Paper 94131, University Library of Munich, Germany.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Emeka Nkoro & Aham Kelvin Uko, 2022. "Foreign Direct Investment and Inclusive Growth: The Role of the Financial Sector Development," International Journal of Economic Sciences, European Research Center, vol. 11(2), pages 144-162, November.

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    More about this item

    Keywords

    Foreign Direct Investment; Infrastructures; Public Consumption Expenditure; Long Run Growth Path; Dynamic Optimization;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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