On the interaction between public and private capital in economic growth

This paper introduces two forms of interaction between private and public capital in an endogenous growth model in which productive government expenditure takes the form of a stock-variable and public capital is used in part as an input in the production of final output and in part to increase its own supply. While the first form of interaction involves the stocks of the two capital-goods and takes place within the final output sector through the specification of the aggregate production function (Cobb?CDouglas vs. CES), the second one concerns the rates of investment in the two kinds of capital. The share of productive public expenditure devoted to output production can be either exogenous or endogenous. Our results suggest that when this share is exogenous, along the balanced growth path the optimal growth rate of the economy is a positive function of the degree of complementarity between the two forms of investment. When the share of productive public expenditure devoted to output production is endogenous, the public capital share in GDP becomes, along with the model??s preference parameters, an important determinant of the economy??s long run growth. We also find that the optimal growth rate is an increasing function of the elasticity of substitution between public and private capital inputs in goods production, and is independent of the complementarity/substitutability between the two forms of investment.     

资本性支出分权、公共资本投资构成与经济增长

本文建立一个财政分权框架下的两部门内生增长模型,从理论上分析最优公共资本投资配置及其对经济增长的影响,并以我国全国和省份经济数据为基础对本文理论分析进行实证检验。分析表明,我国公共资本投资构成不尽合理,全国和地方公共物质资本投资比重明显偏低;中央和地方政府间公共资本投资事权划分也欠妥,资本性支出分权水平明显过高。这些结论对于我国今后财政政策的合理调整、政府间事权的科学划分具有重要意义。     

Using surveys of business perceptions as a guide to growth‐enhancing fiscal reforms

This paper assesses the merits of using business perceptions of growth constraints as a guide to growth‐enhancing fiscal policy reforms. Using endogenous growth models in which the government levies an income tax to provide public inputs to the production of private firms, the paper demonstrates that such perceptions of growth constraints may be misleading from a policy perspective. In particular, firms can be expected to systematically overestimate the growth‐enhancing effects of lower tax rates relative to public services and public capital, and underestimate the growth‐enhancing effects of greater provision of public capital relative to taxation and public services. In addition, we show that firms rank different public services and different types of public capital according to the actual costs they impose on firms. It is then shown that these theoretical predictions regarding how firms rank constraints correspond closely to the observed ranking of constraints by firms in the World Bank's Enterprise Surveys.     

政府公共资本投资的长期经济增长效应

本文首先建立一个包含政府公共资本投资的两部门内生增长模型,并把公共资本投资分为政府物质资本投资和人力资本投资,从而对公共资本投资的长期经济增长效应进行理论分析。结论是,两种形式的公共资本投资对长期经济增长都可能具有正效应也可能具有负效应,取决于民间经济主体消费跨时替代弹性大小。其次,我们利用向量自回归分析框架,对我国1978—2004年间公共资本投资对长期经济增长的影响作实证分析。结论是,我国两种形式的公共资本投资与经济增长之间存在着长期均衡关系,其中政府公共物质资本投资对长期经济增长的正影响更为显著,而政府公共人力资本投资对长期经济增长的正影响较小,且在短期内不利于经济增长。这一结论对我国今后科学制定财政政策和选择公共投资领域都具有重要意义。     

Public Investment Rules and Endogenous Growth with Empirical Evidence From Canada

This paper examines theoretically and empirically the effects of public investmentrules on output growth in an economy with private and public capital. It is shownthat the decisions on public capital formation are closely associated with the growthrate of output and generate endogenous growth. A permanent change in the policyrule implies a new long-run growth rate of output, but the economy will onlygradually approach the new steady-state due to adjustment costs in private capitalaccumulation. The model predictions are tested using data from Canada for theperiod 1955-1999. The data support the endogenous growth hypothesis and thetwo central assumptions of the model: (i) the growth rate of output follows closelythe rate of infrastructure formation and (ii) private capital formation also followsthe rate of infrastructure formation but adjusts with a delay.     

Decentralization,social capital,and regional growth: The case of the Italian North-South divide

This paper aims to show how a region's constant level of social capital may have a very different impact on its economic growth depending on whether the central or the local level of government is responsible for regional policy.Our case study is the economic performance of Northern and Southern Italy in the post-World War II period, when a long phase of regional convergence came to a sudden halt in the early 1970s. We focus on the economic effects of the 1970s institutional reforms on government decentralization and wage bargaining. Our main hypothesis is that decentralization allocates the provision of public capital to institutions, the local ones, more exposed to a territory's social capital. Since social capital is lower in the Southern regions, decentralization made their developmental policies less effective from 1970 onwards, and regional inequality increased.We build an endogenous growth model augmented to include the interaction between social capital and public investment as well as the reform of the Italian labour market. We calibrate our model using data of the Italian regions for 1951–71. Our quantitative results indicate that decentralization triggered the influence of local social capital on growth and played a central role in halting the convergence path of the low-social-capital regions.     

China's Fiscal Decentralization and Regional Economic Growth

The present paper applies Lucas's theory of endogenous growth and Stiglitz's theory of local public goods to build an econometric model consisting of five simultaneous equations to study China's fiscal decentralization effects on regional economic growth. The model is estimated by two‐stage least squares using a set of panel data on 31 Chinese provinces during 1996–2005. The estimated results show that China's fiscal decentralization increased the local governments' expenditure on physical infrastructure and education, which led to the rising local physical capital stock and human capital levels, respectively, and then resulted in the growth of regional economies.     

Evidence of public capital spillovers and endogenous growth in Taiwan

This study reaffirms the empirical evidence of public capital spillovers and endogenous growth by using data for the period 1966Q3–2012Q3 in Taiwan. Avoiding the use of a 100% depreciation rate for generating public and private capital stock series that is applied in some related studies, this study estimates these series by using disaggregate data of various investment assets and applying their individual depreciation rates, as calculated by Jorgenson and Stiroh (2000). The results show that, first, (per capita) output, private capital stock, and public capital stock cointegrated in the sample period. Second, the contribution of private capital to output is 50% higher than that of public capital. Third, in the presence of significant and sizeable public capital spillover effects, growth in Taiwan is strictly endogenous. Finally, the dynamic model with a cointegration equation helps in studying some sensible short-run properties of the model and bi-directional effects among variables.     

Public investment,the rate of return,and optimal fiscal policy in a stochastically growing economy

This study examines the optimal fiscal policy in a stochastic endogenous growth model with private and public capital. The government is willing to actualize a socially optimal equilibrium using a lump-sum tax and government debt linked to public investments, subject to the budget constraint under the golden rule of public finance. A socially optimal fiscal policy states that a deterministic rate of return on government bonds sets the marginal product of public capital. Moreover, public investments optimally adjust the ratio of private capital to public capital to equate the rates of return on such capital. The presence of stochastic disturbances results in a disparity between the optimal marginal products of the two types of capital, as reported in previous empirical studies. This disparity significantly affects the socially optimal growth rate in response to investment risk.     

我国省级公共资本经济效应分析——基于面板VAR模型的实证分析

在现有文献研究的基础上,利用1999—2010年我国29个省(自治区、直辖市)的面板数据,基于内生增长理论构建计量经济模型,检验了公共资本存量、私人资本存量与经济增长之间的面板Granger因果关系。构建面板VAR模型度量公共资本存量对经济的冲击。结果表明:公共资本存量的冲击对人均私人资本存量和人均GDP都产生正向影响,但长期看该影响不具有持续效应。     

Fiscal policy, long‐run growth, and welfare in a stock‐flow model of public goods

Abstract.  We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investment in public capital as a proportion of total public spending, and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome. JEL classification: E62, O40     

Privatization and economic growth in Australia: the shorthand of a long process

The impact of privatization on economic growth has been little investigated relative to disaggregated approaches. A growth accounting framework is used here to investigate the impact of privatization on growth for the Australian economy. The contribution of public capital to the private sector and whether the growth process is endogenous or Solow is evaluated. Separate measures of public and private capital are computed in order to estimate their impacts with labour on Australian gross domestic product (GDP) growth for the period 1960 to 2003. A simple growth rates version is found preferred by stationarity and other tests. Labour growth appears to strongly positively influence the growth of GDP. In contrast, public capital growth has no statistically significant effect on GDP growth, or on private capital productivity. The data are consistent with the hypothesis that the coefficients of the growth equation are the same before and during privatization.     

Public capital, endogenous growth, and endogenous fluctuations

Cazzavillan [Cazzavillan, G., 1996. Public spending, endogenous growth, and endogenous fluctuations. Journal of Economic Theory 71, 394–415] studies a discrete-time, one-sector endogenous growth model with a flow of publicly enjoyable goods and productive services financed through income taxation. He demonstrates how equilibrium paths are indeterminate, for a large range of the consumption externality of public spending. This study extends [Cazzavillan, 1996] by considering an otherwise identical production function, except with public capital stock as an input. The results support the robustness of multiple growth paths even in a one-sector growth model with public capital stock, and modify the set of the consumption externality of public spending, in determining growth dynamics in a similar model with non-accumulated public spending.     

On the growth and welfare maximizing allocation of public investment

In this paper we present an endogenous growth model to analyze the growth maximizing allocation of public investment among N different types of public capital. Using this general model of public capital formation, we analyze the stability of the long-run equilibrium and we derive the growth-maximizing values of the shares of public investment allocated to the different types of public capital, as well as the growth-maximizing tax rate (amount of total public investment as a share of GDP). The empirical implication of the model is that both the effects of the shares of public investment and the tax rate on the long-run growth rate are non-linear, following an inverse U-shaped pattern. Our analysis is completed by showing that the growth-maximizing shares of public investment and the growth-maximizing tax rate also maximize welfare in the decentralized economy.     

A SAVINGS SUBSIDISATION SYSTEM IN A MODEL OF ENDOGENOUS FERTILITY AND ENDOGENOUS GROWTH: AN EXTENSION OF WIGGER (1999)

Population ageing is now an established demographic characteristic of many economies. Economists working in the endogenous growth theory tradition have sought to model the relationship between public pensions, financed on a 'Pay-As-You-Go' basis, and the growth in per capita incomes. The resultant intergenerational wealth redistribution from young to older people seems to decrease private savings, diminish capital accumulation, and lower the growth of per capita incomes. The underlying transmission mechanism appears to be a crowding out effect in private capital markets contingent upon the introduction of public pension systems. A growing literature exists on the interrelationships between public pension schemes, fertility rates and endogenous growth. Following Wigger's (1999) pioneering overlapping generations endogenous growth model, we extend this model to examine the effects of a savings subsidisation system on the rate of per capita income growth, fertility and voluntary intrafamily wealth transfers, where parents view children both as an insurance good and a consumption good. Moreover, children care about the consumption levels of their parents. An increase in contributions to a savings subsidised public pension scheme will crowd out private intergenerational transfers from the young to the old and thereby negate the usefulness of children as an insurance good.     

Optimal fiscal policy in an endogenous growth model with public capital: a note

This note presents an investigation of the optimal tax rule in endogenous growth models with public capital. It is presumed that the government levies only an income tax in addition to financing public investment. Furthermore, a household’s saving is deducted from the income tax. We find the optimal tax rule whereby the social optimum is attainable. The manner by which a government imposes a tax on income and administers tax deductions is important for attaining a socially optimal situation.      

Infrastructure Investment and Maintenance Expenditure: Optimal Allocation Rules in a Growing Economy

This paper studies the allocation of public expenditure between infrastructure investment and maintenance in an endogenous growth framework. In the basic model, maintenance spending affects both the durability and efficiency of public capital. The balanced growth path is derived and transitional dynamics associated with a revenue-neutral increase in expenditure on maintenance are analyzed. The model is then extended to account for the possibility that public spending on maintenance affects also the durability of private capital. The growth-maximizing tax rate and share of infrastructure investment are calculated in both cases. First- and second-best welfare-maximizing solutions are also discussed.     

The Budget Deficit, Public Debt, and Endogenous Growth

This paper analyzes the effects of public debt on endogenous growth in an overlapping generations model. The government fixes the budget deficit ratio. If the deficit ratio stays below a critical level, then there are two steady states where capital, output, and public debt grow at the same constant rate. An increase in the deficit ratio reduces the growth rate. If the deficit ratio exceeds the critical level, then there is no steady state. Capital growth declines continuously, and capital is driven down to zero in finite time.     

Public capital,deficit financing,and economic growth in a stochastic economy

This paper examines the relationship among deficit-financing fiscal policy, risk and economic growth in a stochastic endogenous growth model with private and public capital. We show that there are positive balanced-growth rate and a debt-to-GDP ratio that depend on deep parameters such as the income tax rate and the standard deviation of the growth rate of private and public capital. Investment and fiscal shocks influence the mean and variance of the growth rate and the debt dependency rate through portfolio changes and capital accumulation. In particular, an increase in the risk of private investment destabilizes the economy and reduces the mean growth rate if the portfolio change is drastic, and this increase in risk increases the debt-to-GDP ratio. In contrast, an increase in the income tax rate stabilizes the economy, increases the mean growth rate, and has a positive or negative effect on the debt-to-GDP ratio according to the ratio of public to private capital if the income tax rate is sufficiently small.     

公共资本性支出、经常性支出与内生经济增长

本文基于一个含有两类不同产出能力的公共商品的内生增长模型,通过数理分析得出在市场经济条件下最优公共支出结构的依据是公共商品各自的产出弹性.进而采用面板数据模型对13个发达国家1972～2009年的公共支出实践进行了实证研究.实证结果表明,经常性(资本性)支出对经济增长有正(负)效应.该研究结论为平衡预算下的公共支出结构决策提供了参考依据.