Template-type: ReDIF-Paper 1.0
Author-Name: Gustavo A. Marrero
Author-Email: gmarrero@ull.es
Author-Workplace-Name: Universidad de la Laguna; Universidad Complutense de Madrid, Instituto Complutense 
	de Análisis Económico (ICAE)
Title: Revisiting the optimal stationary public investment policy in endogenous growth economies
Abstract: One strand of the literature on endogenous growth concerns models in which pub-
	lic infrastructure a¤ects the private production process. A puzzle in this literature
	is that observed public investment-to-output ratios for developed economies tend to
	fall short of theoretical model-based optimal ratios. We reexamine the optimal choice
	of public investment in a more general and plausible framework, which allows for a
	gradual transition between di¤erent steady states, a lower depreciation rate for public
	capital than for private capital, an elasticity of intertemporal substitution that di¤ers
	from unity and the need to …nance a non-trivial share of public services in output
	in each period. Given other fundamentals in the economy, we show that the optimal
	public investment-to-output ratio is smaller for low-growth economies, for economies
	populated by consumers with low preferences for substituting consumption intertem-
	porally and when public capital is durable. Moreover, for a calibrated economy, we
	show that a combination of these factors solves the public investment puzzle.
Classification-JEL: E13, E62, O41
Keywords: Public investment, Stationary policy, Endogenous growth. 
Length: 25 pages 
Creation-Date: 2005
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0509.txt 
File-URL: https://eprints.ucm.es/id/eprint/7902/1/0509.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0509