FDI, Government Budget and Efficiency of Public Infrastructure Capital

Vida Varahrami () and Arghavan Novin Vajari ()
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Vida Varahrami: Shahid Beheshti University, Tehran
Arghavan Novin Vajari: Tehran University

International Journal of Economic Sciences, 2019, vol. 8, issue 2, 148-158

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.

Keywords: Foreign Direct Investment; Infrastructures; Public Consumption Expenditure; Long Run Growth Path; Dynamic Optimization (search for similar items in EconPapers)
JEL-codes: F21 H54 O40 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sek:jijoes:v:8:y:2019:i:2:p:148-158

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