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

A.K. Fosu; Y.Y. Getachew; T.H.W. Ziesemer

doi:10.1017/S1365100515000206

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

A.K. Fosu, Y.Y. Getachew, T.H.W. Ziesemer^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

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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. © Cambridge University Press 2015.

Original language	English
Pages (from-to)	1957-1986
Number of pages	30
Journal	Macroeconomic Dynamics
Volume	20
Issue number	8
DOIs	https://doi.org/10.1017/S1365100515000206
Publication status	Published - Dec 2016

Keywords

Economic Growth
Nonlinearity
Public Investment
ENDOGENOUS GROWTH
STATES
SYSTEM GMM
LONG-RUN
FISCAL-POLICY
ESTIMATOR
RUN ECONOMIC-GROWTH
TOO
INFRASTRUCTURE
PANEL-DATA MODELS

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10.1017/S1365100515000206

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@article{f0797aa30d9146b9877aeeb8031fb713,

title = "Optimal public investment, growth, and consumption: Evidence from African countries",

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. {\textcopyright} Cambridge University Press 2015.",

keywords = "Economic Growth, Nonlinearity, Public Investment, ENDOGENOUS GROWTH, STATES, SYSTEM GMM, LONG-RUN, FISCAL-POLICY, ESTIMATOR, RUN ECONOMIC-GROWTH, TOO, INFRASTRUCTURE, PANEL-DATA MODELS",

author = "A.K. Fosu and Y.Y. Getachew and T.H.W. Ziesemer",

note = "data source: African Development Indicators Export Date: 8 December 2016 Correspondence Address: Ziesemer, T.H.W.; Department of Economics, UNU-MERIT, Maastricht UniversityNetherlands; email: [email protected] References: Agenor, P.-R., Fiscal policy and endogenous growth with public infrastructure (2008) Oxford Economic Papers, 60 (1), pp. 57-87; Angyridis, C., Endogenous growth with public capital and progressive taxation (2014) Macroeconomic Dynamics, 5, pp. 1-20; Arellano, M., Bover, O., Another look at the instrumental variable estimation of errorcomponents models (1995) Journal of Econometrics, 68 (1), pp. 29-51; Aschauer, D.A., (1998) How Big Should the Public Capital Stock Be? The Relationship between Public Capital and Economic Growth, , Economics Public Policy Brief Archive ppb 43, Levy Economics Institute; Aschauer, D.A., Do states optimize? Public capital and economic growth (2000) Annals of Regional Science, 34 (3), pp. 343-363; Aschauer, D.A., Public capital and economic growth: Issues of quantity, finance, and efficiency (2000) Economic Development and Cultural Change, 48 (2), pp. 391-406; Attanasio, O.P., Picci, L., Scorcu, A.E., Saving, growth, and investment: A macroeconomic analysis using a panel of countries (2000) Review of Economics and Statistics, 82 (2), pp. 182-211; Ayogu, M.D., Before prebendalism: A positive analysis of core infrastructure investment in a developing fiscal federalism (1999) African Development Review/Revue Africaine de Developpement, 11 (2), pp. 169-198; Ayogu, M.D., Infrastructure and economic development in Africa: A review (2007) Journal of African Economies, 16, pp. 75-126; Baltagi, B., (2008) Econometric Analysis of Panel Data, , 4th ed. Chichester, UK: Wiley; Barro, R.J., Government spending in a simplemodel of endogeneous growth (1990) Journal of Political Economy, 98 (5), pp. S103-S125; Basu, P., An adjustment cost model of asset pricing (1987) International Economic Review, 28 (3), pp. 609-621; Basu, P., Gillman, M., Pearlman, J., Inflation, human capital and Tobin's Q (2012) Journal of Economic Dynamics and Control, 36 (7), pp. 1057-1074; Bleaney, M., Gemmell, N., Kneller, R., Testing the endogenous growth model: Public expenditure, taxation, and growth over the long run (2001) Canadian Journal of Economics, 34 (1), pp. 36-57; Bond, S., (2002) Dynamic Panel Data Models: A Guide to Microdata Methods and Practice, , CeMMAP working paper CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies; Boopen, S., Transport infrastructure and economic growth: Evidence from Africa using dynamic panel estimates (2006) Empirical Economics Letters, 5 (1), pp. 37-52; Bruno, G.S.F., Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models (2005) Economics Letters, 87 (3), pp. 361-366; Bun, M.J.G., Windmeijer, F., The weak instrument problem of the system GMM estimator in dynamic panel data models (2010) Econometrics Journal, 13 (1), pp. 95-126; Calderon, C., (2009) Infrastructure and Growth in Africa, , Policy research working paper 4914, World Bank, Washington, DC; Calderon, C., Serven, L., (2008) Infrastructure and Economic Development in Sub-Saharan Africa, , Policy research working papers 4712, World Bank, Washington, DC; Canning, D., (1999) Infrastructure's Contribution to Aggregate Output, , Policy Research Working Paper Series 2246, The World Bank; Canning, D., Pedroni, P., Infrastructure, long-run economic growth and causality tests for cointegrated panels (2008) Manchester School, 76 (5), pp. 504-527; Cavallo, E., Daude, C., Public investment in developing countries: A blessing or a curse? (2011) Journal of Comparative Economics, 39 (1), pp. 65-81; Clemens, M., Bazzi, S., (2009) Blunt Instruments: On Establishing the Causes of Economic Growth, , (May). Working paper 171, Center for Global Development; De La-Croix, D., Michel, P., (2002) A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations, , Cambridge, UK: Cambridge University Press; Demetriades, P.O., Mamuneas, T.P., Intertemporal output and employment effects of public infrastructure capital: Evidence from 12 OECD economies (2000) Economic Journal, 110 (465), pp. 687-712; Devarajan, S., Easterly, W., Pack, H., Is investment in Africa too high or too low? Macroand micro-evidence (2001) Journal of African Economies, 10, pp. 81-108; Devarajan, S., Easterly, W., Pack, H., Low investment is not the constraint on african development (2003) Economic Development and Cultural Change, 51 (3), pp. 547-571; Dincecco, M., Prado, M., Warfare, fiscal capacity, and performance (2012) Journal of Economic Growth, 17 (3), pp. 171-203; Dioikitopoulos, E.V., Kalyvitis, S., Endogenous time preference and public policy: Growth and fiscal implications (2010) Macroeconomic Dynamics, 14 (S2), pp. 243-257; Estache, A., Speciale, B., Veredas, D., (2005) How Much Does Infrastructure Matter to Growth in Sub-Saharan Africa?, , Working paper, World Bank, Washington, DC; Everaert, G., Heylen, F., Public capital and long-term labour market performance in Belgium (2004) Journal of Policy Modeling, 26 (1), pp. 95-112; Fedderke, J., Bogetic, Z., Infrastructure and growth in South Africa: Direct and indirect productivity impacts of 19 infrastructure measures (2009) World Development, 37 (9), pp. 1522-1539; Fedderke, J.W., Perkins, P., Luiz, J.M., Infrastructural investment in long-run economic growth: South Africa 1875-2001 (2006) World Development, 34 (6), pp. 1037-1059; Feenstra, R.C., Inklaar, R., Timmer, M., (2013) The Next Generation of the Penn World Table, , Working paper 19255, National Bureau of Economic Research; Foster, V., Briceno-Garmendia, C., (2010) Africa's Infrastructure: A Time for Transformation, , Washington, DC: The International Bank for Reconstruction and Development/The World Bank; Futagami, K., Morita, Y., Shibata, A., Dynamic analysis of an endogenous growth model with public capital (1993) Scandinavian Journal of Economics, 95 (4), pp. 607-625; Glomm, G., Ravikumar, B., Public investment in infrastructure in a simple growth model (1994) Journal of Economic Dynamics and Control, 18 (6), pp. 1173-1187; Glomm, G., Ravikumar, B., Productive government expenditures and long-run growth (1997) Journal of Economic Dynamics and Control, 21 (1), pp. 183-204; Greene, J., The external debt problem of sub-saharan Africa (1989) IMF Staff Papers, 36 (4), pp. 836-874; Hashimzade, N., Myles, G.D., Growth and public infrastructure (2010) Macroeconomic Dynamics, 14 (S2), pp. 258-274; Heston, A., Summers, R., Aten, B., (2009) Penn World Table Version 6.3, , University of Pennsylvania, Center for International Comparisons of Production, Income and Prices; Humphreys, C., Underwood, J., (1989) The External Debt Difficulties of Low Income Africa, , Policy research working paper 255, World Bank, Washington, DC; Judson, R.A., Owen, A.L., Estimating dynamic panel data models: A guide for macroeconomists (1999) Economics Letters, 65 (1), pp. 9-15; Kalaitzidakis, P., Tzouvelekas, V., Military spending and the growth-maximizing allocation of public capital: A cross-country empirical analysis (2011) Economic Inquiry, 49 (4), pp. 1029-1041; Kamps, C., Is there a lack of public capital in the european union? (2005) EIB Papers, 10 (1), pp. 72-93; Kocherlakota, N.R., Yi, K.-M., A simple time series test of endogenous vs. Exogenous growth models: An application to the United States (1996) Review of Economics and Statistics, 78 (1), pp. 126-134; Lucas, R.E., Jr., Prescott, E.C., Investment under uncertainty (1971) Econometrica, 39 (5), pp. 659-681; Luoto, J., Aggregate infrastructure capital stock and long-run growth: Evidence from finnish data (2011) Journal of Development Economics, 94 (2), pp. 181-191; Milbourne, R., Otto, G., Voss, G., Public investment and economic growth (2003) Applied Economics, 35 (5), pp. 527-540; Miller, N.J., Tsoukis, C., On the optimality of public capital for long-run economic growth: Evidence from panel data (2001) Applied Economics, 33 (9), pp. 1117-1129; Novales, A., Fernandez, E., Ruiz, J., (2009) Economic Growth: Theory and Numerical Solution Methods, , Heidelberg, Germany: Springer; Okui, R., The optimal choice of moments in dynamic panel data models (2009) Journal of Econometrics, 151 (1), pp. 1-16; Romp, W., De Haan, J., Public capital and economic growth: A critical survey (2007) Perspektiven der Wirtschaftspolitik, 8, pp. 6-52; Roodman, D., (2006) How to Do xtabond2: An Introduction to {"}Difference{"} and {"}System{"} GMM in Stata, , Working paper 103, Center for Global Development; Roodman, D., A note on the theme of too many instruments (2009) Oxford Bulletin of Economics and Statistics, 71 (1), pp. 135-158; Roodman, D., How to do xtabond2: An introduction to difference and system GMM in stata (2009) Stata Journal, 9 (1), pp. 86-136; Smith, R., Fuertes, A.-M., (2010) Panel Time-Series, Cemmap Course, April 2010, , http://www.bbk.ac.uk/ems/faculty/smith/ron-smith-downloads/RSpanel.pdf; Turnovsky, S.J., Fiscal policy in a growing economy with public capital (1997) Macroeconomic Dynamics, 1 (3), pp. 615-639; Turnovsky, S.J., Government policy in a stochastic growth model with elastic labor supply (2000) Journal of Public Economic Theory, 2 (4), pp. 389-433; Turnovsky, S.J., The transitional dynamics of fiscal policy: Long-run capital accumulation and growth (2004) Journal of Money, Credit and Banking, 36 (5), pp. 883-910; Wooldridge, J.M., (2002) Econometric Analysis of Cross Section and Panel Data, , Cambridge, MA: MIT Press; (2012) World Data Bank, , Washington, DC: World Bank; Yontcheva, B., Masud, N., (2005) Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid, , Working paper 05/100, International Monetary Fund; Ziesemer, T., Public factors and democracy in poverty analysis (1990) Oxford Economic Papers, 42 (1), pp. 268-280",

year = "2016",

month = dec,

doi = "10.1017/S1365100515000206",

language = "English",

volume = "20",

pages = "1957--1986",

journal = "Macroeconomic Dynamics",

issn = "1365-1005",

publisher = "Cambridge University Press",

number = "8",

}

TY - JOUR

T1 - Optimal public investment, growth, and consumption

T2 - Evidence from African countries

AU - Fosu, A.K.

AU - Getachew, Y.Y.

AU - Ziesemer, T.H.W.

N1 - data source: African Development Indicators Export Date: 8 December 2016 Correspondence Address: Ziesemer, T.H.W.; Department of Economics, UNU-MERIT, Maastricht UniversityNetherlands; email: [email protected] References: Agenor, P.-R., Fiscal policy and endogenous growth with public infrastructure (2008) Oxford Economic Papers, 60 (1), pp. 57-87; Angyridis, C., Endogenous growth with public capital and progressive taxation (2014) Macroeconomic Dynamics, 5, pp. 1-20; Arellano, M., Bover, O., Another look at the instrumental variable estimation of errorcomponents models (1995) Journal of Econometrics, 68 (1), pp. 29-51; Aschauer, D.A., (1998) How Big Should the Public Capital Stock Be? The Relationship between Public Capital and Economic Growth, , Economics Public Policy Brief Archive ppb 43, Levy Economics Institute; Aschauer, D.A., Do states optimize? Public capital and economic growth (2000) Annals of Regional Science, 34 (3), pp. 343-363; Aschauer, D.A., Public capital and economic growth: Issues of quantity, finance, and efficiency (2000) Economic Development and Cultural Change, 48 (2), pp. 391-406; Attanasio, O.P., Picci, L., Scorcu, A.E., Saving, growth, and investment: A macroeconomic analysis using a panel of countries (2000) Review of Economics and Statistics, 82 (2), pp. 182-211; Ayogu, M.D., Before prebendalism: A positive analysis of core infrastructure investment in a developing fiscal federalism (1999) African Development Review/Revue Africaine de Developpement, 11 (2), pp. 169-198; Ayogu, M.D., Infrastructure and economic development in Africa: A review (2007) Journal of African Economies, 16, pp. 75-126; Baltagi, B., (2008) Econometric Analysis of Panel Data, , 4th ed. Chichester, UK: Wiley; Barro, R.J., Government spending in a simplemodel of endogeneous growth (1990) Journal of Political Economy, 98 (5), pp. S103-S125; Basu, P., An adjustment cost model of asset pricing (1987) International Economic Review, 28 (3), pp. 609-621; Basu, P., Gillman, M., Pearlman, J., Inflation, human capital and Tobin's Q (2012) Journal of Economic Dynamics and Control, 36 (7), pp. 1057-1074; Bleaney, M., Gemmell, N., Kneller, R., Testing the endogenous growth model: Public expenditure, taxation, and growth over the long run (2001) Canadian Journal of Economics, 34 (1), pp. 36-57; Bond, S., (2002) Dynamic Panel Data Models: A Guide to Microdata Methods and Practice, , CeMMAP working paper CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies; Boopen, S., Transport infrastructure and economic growth: Evidence from Africa using dynamic panel estimates (2006) Empirical Economics Letters, 5 (1), pp. 37-52; Bruno, G.S.F., Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models (2005) Economics Letters, 87 (3), pp. 361-366; Bun, M.J.G., Windmeijer, F., The weak instrument problem of the system GMM estimator in dynamic panel data models (2010) Econometrics Journal, 13 (1), pp. 95-126; Calderon, C., (2009) Infrastructure and Growth in Africa, , Policy research working paper 4914, World Bank, Washington, DC; Calderon, C., Serven, L., (2008) Infrastructure and Economic Development in Sub-Saharan Africa, , Policy research working papers 4712, World Bank, Washington, DC; Canning, D., (1999) Infrastructure's Contribution to Aggregate Output, , Policy Research Working Paper Series 2246, The World Bank; Canning, D., Pedroni, P., Infrastructure, long-run economic growth and causality tests for cointegrated panels (2008) Manchester School, 76 (5), pp. 504-527; Cavallo, E., Daude, C., Public investment in developing countries: A blessing or a curse? (2011) Journal of Comparative Economics, 39 (1), pp. 65-81; Clemens, M., Bazzi, S., (2009) Blunt Instruments: On Establishing the Causes of Economic Growth, , (May). Working paper 171, Center for Global Development; De La-Croix, D., Michel, P., (2002) A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations, , Cambridge, UK: Cambridge University Press; Demetriades, P.O., Mamuneas, T.P., Intertemporal output and employment effects of public infrastructure capital: Evidence from 12 OECD economies (2000) Economic Journal, 110 (465), pp. 687-712; Devarajan, S., Easterly, W., Pack, H., Is investment in Africa too high or too low? Macroand micro-evidence (2001) Journal of African Economies, 10, pp. 81-108; Devarajan, S., Easterly, W., Pack, H., Low investment is not the constraint on african development (2003) Economic Development and Cultural Change, 51 (3), pp. 547-571; Dincecco, M., Prado, M., Warfare, fiscal capacity, and performance (2012) Journal of Economic Growth, 17 (3), pp. 171-203; Dioikitopoulos, E.V., Kalyvitis, S., Endogenous time preference and public policy: Growth and fiscal implications (2010) Macroeconomic Dynamics, 14 (S2), pp. 243-257; Estache, A., Speciale, B., Veredas, D., (2005) How Much Does Infrastructure Matter to Growth in Sub-Saharan Africa?, , Working paper, World Bank, Washington, DC; Everaert, G., Heylen, F., Public capital and long-term labour market performance in Belgium (2004) Journal of Policy Modeling, 26 (1), pp. 95-112; Fedderke, J., Bogetic, Z., Infrastructure and growth in South Africa: Direct and indirect productivity impacts of 19 infrastructure measures (2009) World Development, 37 (9), pp. 1522-1539; Fedderke, J.W., Perkins, P., Luiz, J.M., Infrastructural investment in long-run economic growth: South Africa 1875-2001 (2006) World Development, 34 (6), pp. 1037-1059; Feenstra, R.C., Inklaar, R., Timmer, M., (2013) The Next Generation of the Penn World Table, , Working paper 19255, National Bureau of Economic Research; Foster, V., Briceno-Garmendia, C., (2010) Africa's Infrastructure: A Time for Transformation, , Washington, DC: The International Bank for Reconstruction and Development/The World Bank; Futagami, K., Morita, Y., Shibata, A., Dynamic analysis of an endogenous growth model with public capital (1993) Scandinavian Journal of Economics, 95 (4), pp. 607-625; Glomm, G., Ravikumar, B., Public investment in infrastructure in a simple growth model (1994) Journal of Economic Dynamics and Control, 18 (6), pp. 1173-1187; Glomm, G., Ravikumar, B., Productive government expenditures and long-run growth (1997) Journal of Economic Dynamics and Control, 21 (1), pp. 183-204; Greene, J., The external debt problem of sub-saharan Africa (1989) IMF Staff Papers, 36 (4), pp. 836-874; Hashimzade, N., Myles, G.D., Growth and public infrastructure (2010) Macroeconomic Dynamics, 14 (S2), pp. 258-274; Heston, A., Summers, R., Aten, B., (2009) Penn World Table Version 6.3, , University of Pennsylvania, Center for International Comparisons of Production, Income and Prices; Humphreys, C., Underwood, J., (1989) The External Debt Difficulties of Low Income Africa, , Policy research working paper 255, World Bank, Washington, DC; Judson, R.A., Owen, A.L., Estimating dynamic panel data models: A guide for macroeconomists (1999) Economics Letters, 65 (1), pp. 9-15; Kalaitzidakis, P., Tzouvelekas, V., Military spending and the growth-maximizing allocation of public capital: A cross-country empirical analysis (2011) Economic Inquiry, 49 (4), pp. 1029-1041; Kamps, C., Is there a lack of public capital in the european union? (2005) EIB Papers, 10 (1), pp. 72-93; Kocherlakota, N.R., Yi, K.-M., A simple time series test of endogenous vs. Exogenous growth models: An application to the United States (1996) Review of Economics and Statistics, 78 (1), pp. 126-134; Lucas, R.E., Jr., Prescott, E.C., Investment under uncertainty (1971) Econometrica, 39 (5), pp. 659-681; Luoto, J., Aggregate infrastructure capital stock and long-run growth: Evidence from finnish data (2011) Journal of Development Economics, 94 (2), pp. 181-191; Milbourne, R., Otto, G., Voss, G., Public investment and economic growth (2003) Applied Economics, 35 (5), pp. 527-540; Miller, N.J., Tsoukis, C., On the optimality of public capital for long-run economic growth: Evidence from panel data (2001) Applied Economics, 33 (9), pp. 1117-1129; Novales, A., Fernandez, E., Ruiz, J., (2009) Economic Growth: Theory and Numerical Solution Methods, , Heidelberg, Germany: Springer; Okui, R., The optimal choice of moments in dynamic panel data models (2009) Journal of Econometrics, 151 (1), pp. 1-16; Romp, W., De Haan, J., Public capital and economic growth: A critical survey (2007) Perspektiven der Wirtschaftspolitik, 8, pp. 6-52; Roodman, D., (2006) How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata, , Working paper 103, Center for Global Development; Roodman, D., A note on the theme of too many instruments (2009) Oxford Bulletin of Economics and Statistics, 71 (1), pp. 135-158; Roodman, D., How to do xtabond2: An introduction to difference and system GMM in stata (2009) Stata Journal, 9 (1), pp. 86-136; Smith, R., Fuertes, A.-M., (2010) Panel Time-Series, Cemmap Course, April 2010, , http://www.bbk.ac.uk/ems/faculty/smith/ron-smith-downloads/RSpanel.pdf; Turnovsky, S.J., Fiscal policy in a growing economy with public capital (1997) Macroeconomic Dynamics, 1 (3), pp. 615-639; Turnovsky, S.J., Government policy in a stochastic growth model with elastic labor supply (2000) Journal of Public Economic Theory, 2 (4), pp. 389-433; Turnovsky, S.J., The transitional dynamics of fiscal policy: Long-run capital accumulation and growth (2004) Journal of Money, Credit and Banking, 36 (5), pp. 883-910; Wooldridge, J.M., (2002) Econometric Analysis of Cross Section and Panel Data, , Cambridge, MA: MIT Press; (2012) World Data Bank, , Washington, DC: World Bank; Yontcheva, B., Masud, N., (2005) Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid, , Working paper 05/100, International Monetary Fund; Ziesemer, T., Public factors and democracy in poverty analysis (1990) Oxford Economic Papers, 42 (1), pp. 268-280

PY - 2016/12

Y1 - 2016/12

N2 - 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. © Cambridge University Press 2015.

AB - 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. © Cambridge University Press 2015.

KW - Economic Growth

KW - Nonlinearity

KW - Public Investment

KW - ENDOGENOUS GROWTH

KW - STATES

KW - SYSTEM GMM

KW - LONG-RUN

KW - FISCAL-POLICY

KW - ESTIMATOR

KW - RUN ECONOMIC-GROWTH

KW - TOO

KW - INFRASTRUCTURE

KW - PANEL-DATA MODELS

U2 - 10.1017/S1365100515000206

DO - 10.1017/S1365100515000206

M3 - Article

SN - 1365-1005

VL - 20

SP - 1957

EP - 1986

JO - Macroeconomic Dynamics

JF - Macroeconomic Dynamics

IS - 8

ER -

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

Abstract

Keywords

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