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Public Capital And Growth

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Executive Summary

This paper revisits the debate on the effect of public investment on growth by estimating a production function for forty-eight OECD and non-OECD countries, using capital stock as the explanatory variable. The results indicate that increases in public capital stock are positively correlated with growth, after controlling for the initial level of public capital. The effect is stronger for OECD countries in the short-term, while it is stronger for non-OECD countries in the long-term. This is in contrast with the mixed results obtained by studies that mainly use the investment rate as the explanatory variable.

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