A semi-endogenous growth model with public factors, imported capital goods, and limited export demand for developing countries
We build a semi-endogenous growth model for developing countries with non-rivalrous public factors, imported capital goods, and an export demand function. The model exhibits the three-way interaction between public and private investment and trade shown recently in the empirical literature. A parame...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2019-01-01
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| Series: | Journal of Applied Economics |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/15140326.2019.1627726 |
| Summary: | We build a semi-endogenous growth model for developing countries with non-rivalrous public factors, imported capital goods, and an export demand function. The model exhibits the three-way interaction between public and private investment and trade shown recently in the empirical literature. A parameter for government-investment inefficiency has transitional growth effects distorting between public investment and private capital, consumption, and exports, the latter biasing the terms of trade. Our analysis of a vector error-correction model (VECM) for Trinidad &Tobago shows that additional expenditure for public investment increases output less than taxes decrease per capita consumption and therefore is sub-optimal there. Both temporary and permanent shocks on public investment have level effects supporting semi-endogenous growth modeling and demonstrate that the VECM effects are in line with the logic of the theoretical model; terms of trade are endogenous. |
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| ISSN: | 1514-0326 1667-6726 |