Public Investment and Endogenous Growth in a Small Open Economy

CEPR Discussion Paper Series No. 1479

Posted: 1 Apr 1997

See all articles by George S. Alogoskoufis

George S. Alogoskoufis

Athens University of Economics and Business

Sarantis C. Kalyvitis

Athens University of Economics and Business - Department of International and European Economic Studies

Date Written: September 1996

Abstract

This paper examines the effects of three alternative rules for public investment on output growth in a model with private and public capital. The rules considered are: 1) a fixed ratio of public capital to output; 2) a fixed growth rate for public capital; and 3) a fixed ratio of public investment to output. We find that all these rules are closely associated with the growth rate of output and generate endogenous growth. A permanent change in the policy rule implies a new long-run growth rate of output, but the economy will only gradually approach the new steady state due to adjustment costs in private capital accumulation.

JEL Classification: H54, O41

Suggested Citation

Alogoskoufis, George S. and Kalyvitis, Sarantis C., Public Investment and Endogenous Growth in a Small Open Economy (September 1996). CEPR Discussion Paper Series No. 1479, Available at SSRN: https://ssrn.com/abstract=4783

George S. Alogoskoufis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
GR-10434 Athens
Greece
00 30 1 361 6259 (Phone)
00 30 1 362 4689 (Fax)

Sarantis C. Kalyvitis

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

Patission Str 76
GR-10434 Athens
Greece

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