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Does Public Investment Enhance Labor Productivity Growth In Argentina? A Cointegration Analysis

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Executive Summary

This paper addresses the important question of whether public investment spending on economic infrastructure enhances economic growth and labor productivity in Argentina. Following the lead of the endogenous growth literature, it presents a simple modified production function that explicitly includes the positive or negative externality effects generated by public investment. Using co-integration analysis, the paper estimates a dynamic labor productivity function for the 1960-2005 periods that incorporates the impact of public and private investment spending and the labor force (rather than the rate of population growth). The results suggest that (lagged) increases in public investment spending on economic infrastructure as opposed to overall public investment spending have a positive and significant effect on the rate of labor productivity growth.

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