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An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000

An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000 AbstractWe use a simple growth model with public capital to examine the evolution of the US macroeconomy and to discuss the implications of the public infrastructure decline for the productivity slowdown over the last four decades. The main difference of the model to other papers in the related literature is that public investment is actively managed as a non-linear function of the state of the economy, and is not a constant fraction of output in every period. The active management policy delivers transition dynamics that reproduce the public capital downsizing episode, but that accounts for only a minor fraction of the observed productivity slowdown. However, taking into consideration higher rates of returns to public capital or the reallocation of public resources from productive to unproductive expenditures, which is consistent with the US experience in the 70s and 80s, the model simulation accounts for most of the observed productivity slowdown. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B E Journal of Macroeconomics de Gruyter

An Active Public Investment Rule and the Downsizing Experience in the US: 1960-2000

Marrero, Gustavo A.
The B E Journal of Macroeconomics , Volume 5 (1): 1 – May 4, 2005
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References (37)

Publisher
de Gruyter
Copyright
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
ISSN
1935-1690
eISSN
1534-5998
DOI
10.2202/1534-5998.1282
Publisher site
See Article on Publisher Site

Abstract

AbstractWe use a simple growth model with public capital to examine the evolution of the US macroeconomy and to discuss the implications of the public infrastructure decline for the productivity slowdown over the last four decades. The main difference of the model to other papers in the related literature is that public investment is actively managed as a non-linear function of the state of the economy, and is not a constant fraction of output in every period. The active management policy delivers transition dynamics that reproduce the public capital downsizing episode, but that accounts for only a minor fraction of the observed productivity slowdown. However, taking into consideration higher rates of returns to public capital or the reallocation of public resources from productive to unproductive expenditures, which is consistent with the US experience in the 70s and 80s, the model simulation accounts for most of the observed productivity slowdown.

Journal

The B E Journal of Macroeconomics – de Gruyter

Published: May 4, 2005

Keywords: Public capital; active policy rules; downsizing; productivity slowdown; endogenous growth.

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