International Capital Mobility, Public Investment and Economic Growth

30 Pages Posted: 15 Sep 2000

See all articles by Richard Clarida

Richard Clarida

Columbia University - Graduate School of Arts and Sciences - Department of Eco; National Bureau of Economic Research (NBER)

Date Written: October 1993

Abstract

This paper presents a neoclassical model of international capital flows, public investment, and economic growth. Because public capital is non-traded and is imperfectly substitutable for private capital, the open economy converges only gradually to the Solow steady-state notwithstanding the fact that international capital mobility is perfect. Along the convergence path, the economy initially runs a current account deficit that reflects a consumption boom and a surge in public spending. Over time, the rate of public investment declines as does the rate of growth in the standard measure of multifactor productivity in the private sector, the Solow residual.

Suggested Citation

Clarida, Richard H., International Capital Mobility, Public Investment and Economic Growth (October 1993). NBER Working Paper No. w4506. Available at SSRN: https://ssrn.com/abstract=226759

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