Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries

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

No 201464, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper develops a model positing a nonlinear relationship between pub- lic 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 con- sumption as between 8.1 percent and 9.6 percent of GDP. Compared with the observed end-of-panel mean value of no more than 7.26 percent, these estimates suggest that there has been signi?cant public under-investment in Africa.

Pages: 38 pages
Date: 2014-10
New Economics Papers: this item is included in nep-gro
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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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