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Public capital formation and labor productivity growth in Chile
Author(s) -
Ramirez MD.
Publication year - 2000
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.2000.tb00014.x
Subject(s) - economics , productivity , investment (military) , cointegration , labour economics , public capital , government spending , consumption (sociology) , endogenous growth theory , human capital , monetary economics , fiscal policy , public investment , macroeconomics , economic growth , market economy , social science , sociology , politics , political science , welfare , law , econometrics
Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960–95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP.