Public capital and economic growth: Issues of quantity, finance, and efficiency

Economic Development and Cultural Change

Volumn 48, Issue 2, 2000, Pages 390-406

  Aschauer, David Alan ^a  

^a BATES COLLEGE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPMENT THEORY; ECONOMIC GROWTH; ECONOMIC THEORY;

EID: 0034071066     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452464     Document Type: Article

References (26)

1. R. M. Solow, "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics 70 (February 1956): 65-94; T. Swan, "Economic Growth and Capital Accumulation," Economic Record 32 (October 1956): 334-61.
2. R. M. Solow, "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics 70 (February 1956): 65-94; T. Swan, "Economic Growth and Capital Accumulation," Economic Record 32 (October 1956): 334-61.
3. For the importance of human capital, see D. A. Aschauer, "Is Public Education Productive?" in Higher Education and Economic Growth, ed. W. E. Becker and D. R. Lewis (Norwell, Mass.: Kluwer Academic Press, 1991); N. G. Mankiw, D. Romer, and D. N. Weil, "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics 107 (May 1992): 407-37. For the importance of public capital, see D. A. Aschauer, "How Big Should the Public Capital Stock Be? The Relationship between Public Capital and Economic Growth," Public Policy Brief no. 43 (Jerome Levy Economics Institute, Annandale-on-Hudson, N.Y., 1998).
4. For the importance of human capital, see D. A. Aschauer, "Is Public Education Productive?" in Higher Education and Economic Growth, ed. W. E. Becker and D. R. Lewis (Norwell, Mass.: Kluwer Academic Press, 1991); N. G. Mankiw, D. Romer, and D. N. Weil, "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics 107 (May 1992): 407-37. For the importance of public capital, see D. A. Aschauer, "How Big Should the Public Capital Stock Be? The Relationship between Public Capital and Economic Growth," Public Policy Brief no. 43 (Jerome Levy Economics Institute, Annandale-on-Hudson, N.Y., 1998).
5. For the importance of human capital, see D. A. Aschauer, "Is Public Education Productive?" in Higher Education and Economic Growth, ed. W. E. Becker and D. R. Lewis (Norwell, Mass.: Kluwer Academic Press, 1991); N. G. Mankiw, D. Romer, and D. N. Weil, "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics 107 (May 1992): 407-37. For the importance of public capital, see D. A. Aschauer, "How Big Should the Public Capital Stock Be? The Relationship between Public Capital and Economic Growth," Public Policy Brief no. 43 (Jerome Levy Economics Institute, Annandale-on-Hudson, N.Y., 1998).
6. R. Summers and A. Heston, "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," Quarterly Journal of Economics 106 (May 1991): 327-68.
7. The empirical results are not sensitive to other reasonable assumed values for technological progress and depreciation.
8. See, for instance, the results for the "textbook Solow model" in the following articles: Mankiw, Romer, and Weil; and W. Nonneman and P. Vanhoudt, "A Further Augmentation of the Solow Growth Model and the Empirics of Economic Growth for OECD Countries," Quarterly Journal of Economics 111 (August 1996): 943-53.
9. See D. A. Aschauer, "Is Public Education Productive?" and Mankiw, Romer, and Weil.
10. R. J. Barro and X. Sala-I-Martin, "Convergence across States and Regions," Brookings Papers on Economic Activity, no. 1 (1991): 107-82.
11. This theoretical value pertains to a closed economy version of the neoclassical growth model. The convergence rate can be expected to be higher in an open economy version of the neoclassical growth model that allows (partial) capital mobility, as demonstrated in R. J. Barro, N. G. Mankiw, and X. Sala-I-Martin, "Capital Mobility in Neoclassical Models of Growth," American Economic Review 85 (January 1995): 103-15. The countries in the data sample that I used in this article are, for the most part, net debtors in the international capital market. Thus, an estimated convergence rate that lies somewhat below the theoretical value for a closed economy version of the model presents something of an empirical puzzle.
12. R. J. Barro, "Economic Growth in a Cross Section of Countries," Quarterly Journal of Economics 106 (May 1991): 407-43.
13. W. Easterly and S. Rebelo, "Fiscal Policy and Economic Growth," Journal of Monetary Economics 32 (December 1993): 417-58.
14. C. R. Hulten, "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important than How Much You Have," Working Paper no. 5847 (National Bureau of Economic Research, Cambridge, Mass., December 1996).
15. R. J. Barro, "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy 98 (October 1990): S103-S125.
16. D. A. Aschauer, "Do States Optimize? Public Capital and Economic Growth," Working Paper no. 189 (Jerome Levy Economics Institute, April 1997).
17. 3. Assuming that public debt is used to finance the initial acquisition of public capital, we have τ = (r + γ + λ + δ) · Debt, where Debt denotes the ratio of public debt to output. Thus, the tax burden is associated with the ratio of public debt to output. In the empirical work, external public debt is used as a proxy for total public debt, since data on total public debt are unavailable for many of the countries in the sample. Also, the empirical results are not particularly sensitive to the use of Debt or τ as the measure of the tax burden; accordingly tables 2 and 3 only report results from empirical equations using Debt.
18. See Hulten.
19. Ibid., pp. 23 and 25.
20. Specifically, the simple correlation coefficient between the public capital and external public debt variables equals .39.
21. See X. Sala-I-Martin, "I Just Ran Two Million Regressions," American Economic Review Papers and Proceedings (May 1997): 178-83, quote on 179.
22. See J. Cavanagh, F. Cheru, C. Collins, et. al, From Debt to Development (Washington, D.C.: Institute for Policy Studies, 1985). The "Baker 15" countries, ranked in terms of their external debt (high to low), are Brazil, Mexico, Argentina, Venezuela, Phillipines, Chile, Yugoslavia, Nigeria, Morocco, Peru, Columbia, Ecuador, Ivory Coast, Uruguay, and Bolivia.
23. R. D. Gastil, Freedom in the World (Westport, Conn.: Greenwood, 1981).
24. I thank an anonymous referee for this suggestion.
25. The reference country is the sole European country in the sample, namely, Portugal.
26. See Sala-I-Martin.