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

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

Global Development Institute Working Paper Series from GDI, The University of Manchester

Abstract: Abstract How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of Sub-Saharan African (SSA) countries. It develops and estimates a model that posits a non-linear relationship between public investment and growth, to determine the growth-maximising public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs a simulation and examines the public investment GDP share that maximises consumption. This is estimated to be between 8.4 percent and 11 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings.

Date: 2012
New Economics Papers: this item is included in nep-afr, nep-dev, nep-fdg and nep-pbe
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Citations: View citations in EconPapers (14)

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http://hummedia.manchester.ac.uk/institutes/gdi/pu ... pi/bwpi-wp-16412.pdf (application/pdf)

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: 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 (2011)
Working Paper: Optimal public investment, growth, and consumption: Evidence from African countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bwp:bwppap:16412

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