Efficiency-Adjusted Public Capital, Capital Grants, and Growth

Author/Editor:

Ernesto Crivelli

Publication Date:

July 24, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Recent literature has explored the relationship between efficiency-adjusted public capital and economic growth. A debate on whether capital grants, and especially EU funds actually contribute to growth has gained prominence lately. This paper empirically assesses the relationship between the quality of public investment, capital grants, and growth in a sample of 43 emerging and peripheral economies over 1991-2015. To this end, the contribution of public capital to growth is estimated using efficiency-adjusted public capital stock series, constructed reflecting the quality of public investment management institutions. In addition, the determinants of effective public investment are analyzed. The results suggest that capital grants contribute positively to effective public investment, and the latter is significant in explaining variations in economic growth. Finally, the paper illustrates the impact of raising EU funds absorption on potential growth in emerging and peripheral EU countries.

Series:

Working Paper No. 17/168

Subject:

English

Publication Date:

July 24, 2017

ISBN/ISSN:

9781484311127/1018-5941

Stock No:

WPIEA2017168

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

21

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