The Quality of Public Investment
IMF Working Papers, July 1, 2009
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Bibliographic details
- Authors: Shankha Chakraborty, Era Dabla-Norris
- Published: July 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873016.001
Summary and central contribution
- Develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services to affect:
- the productivity of private capital,
- specialization, and
- growth.
- Provides potential explanations for contradictory empirical results on the effects of public investment found in the literature.
- Explains the role of the quality of public infrastructure investment in creating a gap between rich and poor countries.
- Policy implication emphasized: the link between public investment and growth depends critically on the quality and efficiency of public capital.
Model mechanisms and analytical focus
- Incorporates specialized goods production.
- Models interactions between:
- inefficient and corrupt bureaucracies and
- provision of public investment services.
- Examines how these interactions influence private capital productivity and specialization patterns, thereby affecting aggregate growth outcomes.
Key findings and interpretative results
- The model offers potential explanations for:
- contradictory empirical findings on public investment effects in prior literature, and
- the role of public infrastructure investment quality in widening income and productivity differences across countries.
- From a policy perspective, the model suggests:
- quality and efficiency of public capital are critical determinants of whether public investment translates into higher growth.
Policy recommendations and implications
- Prioritize improving the quality and efficiency of public capital to strengthen the positive link between public investment and growth.
- Address bureaucratic inefficiency and corruption as part of public investment strategy to enhance private capital productivity and favorable specialization.
Content in this bundle
- _wp09154 — References