OPTIMAL PUBLIC INVESTMENT, GROWTH, AND CONSUMPTION: EVIDENCE FROM AFRICAN COUNTRIES

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

Macroeconomic Dynamics, 2016, vol. 20, issue 8, 1957-1986

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% 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% and 9.6% of GDP. Compared with the observed end-of-panel mean value of no more than 7.26%, these estimates suggest that there has been significant public underinvestment in Africa.

Date: 2016
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Related works:
Working Paper: Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries (2014)
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)
Working Paper: Optimal public investment, growth, and consumption: Evidence from African countries (2011)
Working Paper: Optimal public investment, growth, and consumption: Evidence from African countries (2011)
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