Efficiency‐Adjusted Public Capital, Capital Grants, and Growth

15 Pages Posted: 5 Jun 2020

See all articles by Ernesto Crivelli

Ernesto Crivelli

International Monetary Fund (IMF)

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Date Written: February 2020

Abstract

A debate on whether capital grants, and especially European Union (EU) funds, actually contribute to growth has gained prominence lately. This article empirically assesses the relationship between the quality of public investment, capital grants, and growth in a sample of 43 emerging and peripheral economies over 1991–2015. To this end, the contribution of public capital to growth is estimated using efficiency‐adjusted public capital stock series, which reflects the quality of public investment management institutions. In addition, the determinants of effective public investment are analyzed. The results suggest that capital grants contribute positively to effective public investment, and the latter is significant in explaining variations in economic growth. Finally, the article illustrates the impact of raising EU funds absorption on potential growth in emerging and peripheral EU countries.

Keywords: capital grants, economic growth, effective public investment, EU funds, public capital stock

Suggested Citation

Crivelli, Ernesto, Efficiency‐Adjusted Public Capital, Capital Grants, and Growth (February 2020). Review of Development Economics, Vol. 24, Issue 1, pp. 254-268, 2020, Available at SSRN: https://ssrn.com/abstract=3618514 or http://dx.doi.org/10.1111/rode.12638

Ernesto Crivelli (Contact Author)

International Monetary Fund (IMF) ( email )

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