Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency

Levy Economics Institute Working Paper No. 233

22 Pages Posted: 1 Sep 1998

See all articles by David Alan Aschauer

David Alan Aschauer

Bates College - Department of Economics

Date Written: July 1998

Abstract

Over the past decade, a large body of theoretical and empirical research has considered the importance of the quantity of public capital for economic growth. For the most part, the empirical results point to a positive role for public capital in determining steady state levels of output per capita and transitional growth rates. At the same time, other work has pointed out the importance of the means of financing government spending for economic growth, with the empirical results indicating a negative influence of higher government spending (proxying for a higher rate of taxation of private sector economic activities) on economic growth. Finally, there is a budding literature on the importance of the effectiveness, or efficiency, of public capital to the growth process; the limited results in the literature suggest that the effectiveness of use of the public capital stock has a meaningful positive influence on growth. This paper develops a common framework to investigate the importance of all three of these aspects of the provision of public capital for growth in output per worker. The paper includes a simple extension of the neoclassical growth model of Solow (1956) and Swan (1956), and a consideration of the relative importance of the three aspects of public capital: "how much you have," "how you pay for it," and "how you use it."

JEL Classification: E62, H50

Suggested Citation

Aschauer, David Alan, Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency (July 1998). Levy Economics Institute Working Paper No. 233, Available at SSRN: https://ssrn.com/abstract=96636 or http://dx.doi.org/10.2139/ssrn.96636

David Alan Aschauer (Contact Author)

Bates College - Department of Economics ( email )

Lewiston, ME 04240
United States