Template-type: ReDIF-Paper 1.0
Author-Name: Gustavo A. Marrero
Author-Person: pma419 
Author-Workplace-Name: Universidad Complutense de Madrid. Facultad de Ciencias Económicas y Empresariales. Dpto. de Economía Cuantitativa
Title: The public investment rule in a simple endogenous endogenous 
	growth model with public capital: active or pasive?
Abstract: In dynamic settings with public capital, it is common to assume that the government claims a
	constant fraction of public investment to total output each period, which is clearly a restrictive
	assumption. The goal of the paper is twofold: first, to find out a more reasonable rule for public 
	investment, consistent with US data, than the constant-ratio rule; second, to analyze the impact 
	of that rule on welfare and judge the public investment downsizing process held in US since the end of the
	sixties. Calibrating for US, the model simulation captures the public investment downsizing process
	held during 1960-2001, as well as the post-1970 slowdown in private factors productivity. Downsizing
	would be optimal whenever the public capital elasticity is approximately smaller than 0.09, a lower level than
	the general consensus in the literature. Thus, it is more likely that our result be consistent to Aschauer
	(1989) and Munnell (1990), which put forth that policymakers would have reduced the stock of public 
	capital below its optimum level along this time.
Classification-JEL: E0, E6, O4.
Keywords: Public investment rule, Policy coordination, Transitional dynamics, Endogenous growth, 
	Public capital elasticity
Length: 32 pages 
Creation-Date: 2004 
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0401.txt
File-URL: https://eprints.ucm.es/id/eprint/7691/1/0401.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0401