Optimal public investment, growth, and consumption: Fresh evidence from African countries

Augustin Fosu (), Yoseph Getachew and Thomas Ziesemer ()

No 2014-057, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: 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 81 percent and 96 percent of GDP. Compared with the observed end-of-panel mean value of no more than 726 percent, these estimates suggest that there has been significant public under-investment in Africa.

Keywords: Economic growth; Economic develeopment; Consumption; Public investment; Public expenditure; Africa; Panel data; GMM (search for similar items in EconPapers)
JEL-codes: H41 O11 O41 O55 (search for similar items in EconPapers)
Date: 2014-06-30
New Economics Papers: this item is included in nep-afr and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: OPTIMAL PUBLIC INVESTMENT, GROWTH, AND CONSUMPTION: EVIDENCE FROM AFRICAN COUNTRIES (2016)
Working Paper: Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries (2014)
Working Paper: Optimal public investment, growth and consumption: evidence from African countries (2012)
Working Paper: Optimal Public Investment, Growth, and Consumption: Evidence from African Countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2014057

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