| This is a study on the contribution of different types of public investment to the process of growth of mixed economies, the main focus being on the experiences of less developed and developing countries.; Looking back at the twenty five years between 1960 and 1985, three trends are observed: (1) The steady rise of the Public expenditure share in Gross domestic product, observed in developing as well as developed countries; (2) Despite such rise, what seems to have been under-investment by developing countries in infrastructures and institutions; (3) A widespread increase in governments' direct engagement in the production of private goods, namely through investment by public enterprises.; Although these tendencies are difficult to explain in purely economic terms, their consequences to economic growth can be analyzed in the framework of optimal choice by private agents, constrained by the decisions made at the political level. This study develops a simple growth model that stresses the distinction between infrastructural public investment, on the one hand, and public investment in the production of private goods (public "rival" investment) on the other hand. The distinction is particularly relevant for private capital accumulation: public infrastructural investment enhances the returns to private investment, whereas additions to the stock of public "rival" capital depress those returns.; A pooled cross-country and time series application to a limited sample of industrialized and developing countries is carried out on the basis of such model. The evidence confirms the need (in terms of economic growth of developing countries) for improvements in public infrastructural investment at the expense of public enterprise investment (at least of the "rival" type), as much as for privatization proper. |
