%0 Report
%A Marrero, Gustavo A.
%T The public investment rule in a simple endogenous endogenous growth model with public capital: active or pasive?
%J Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
%D 2004
%U https://hdl.handle.net/20.500.14352/56602
%X In dynamic settings with public capital, it is common to assume that the governmentclaims a constant fraction of public investment to total output each period, which isclearly a restrictive assumption. The goal of the paper is twofold: first, to find out a morereasonable rule for public investment, consistent with US data, than the constant-ratiorule; second, to analyze the impact of that rule on welfare and judge the public investmentdownsizing process held in US since the end of the sixties. Calibrating for US, the modelsimulation captures the public investment downsizing process held during 1960-2001, aswell as the post-1970 slowdown in private factors productivity. Downsizing would beoptimal whenever the public capital elasticity is approximately smaller than 0.09, a lowerlevel than the general consensus in the literature. Thus, it is more likely that our resultbe consistent to Aschauer (1989) and Munnell (1990), which put forth that policymakerswould have reduced the stock of public capital below its optimum level along this time.
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