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Analyzing economic growth: what role for public investment?

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  • Oukhallou, Youssef

Abstract

This paper discusses the role of public investment in the determination of output growth from different theoretical and empirical points of view. The light is shed on the factors that allegedly explain the success and/or the failure of public investment policies in enhancing productivity and supporting GDP, based on a review of empirical evidence in advanced and developing economies. The downstream objective is to provide decision makers with a set of general rules-of-thumb that are likely to help them improve the macroeconomic returns of public investment. The latter are found to be significantly influenced by efficiency and profitability-based selectivity of investment projects. Countries with a relatively low capital-labor ratio usually have higher public and private capital profitability, while the public-private investment substitutability increases the likelihood of crowding out effects. The paper also gives hints on the possible existence of an optimal growth-maximizing level of public investment.

Suggested Citation

  • Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69772
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    File URL: https://mpra.ub.uni-muenchen.de/69772/1/MPRA_paper_69772.pdf
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    References listed on IDEAS

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    1. Jordi Galí & J. David López-Salido & Javier Vallés, 2007. "Understanding the Effects of Government Spending on Consumption," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 227-270, March.
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    4. Fosu, Augustin Kwasi & Getachew, Yoseph Yilma & Ziesemer, Thomas H.W., 2016. "Optimal Public Investment, Growth, And Consumption: Evidence From African Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 20(8), pages 1957-1986, December.
    5. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
    6. Barro, Robert J, 1979. "Second Thoughts on Keynesian Economics," American Economic Review, American Economic Association, vol. 69(2), pages 54-59, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mouna MARZOUK & Youssef OUKHALLOU, 2017. "Fiscal policy and the Ricardian equivalence: Empirical evidence from Morocco," Journal of Economics Library, KSP Journals, vol. 4(3), pages 372-381, September.
    2. Andrew K. Kamenju & Dr. T. Olweny, 2021. "The Nexus Between Internal Investment and Economic Growth in Kenya," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(2), pages 1-2.

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    More about this item

    Keywords

    GDP growth; Public Investment; Productivity; Private Investment; Development;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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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