On the optimality of public capital for long-run economic growth: evidencefrom panel data

The role of public capital in economic growth is examined using data from t he Penn World Tables and other sources on a large number of countries. Draw ing on intertemporal optimization, the theoretical framework nests the exog enous (Solow) and endogenous types of growth and is data-consistent. It is found that public capital makes a significant contribution to growth. The a ctual level of investment on public capital is suboptimal. Growth in recent decades can be characterized as 'endogenous' with little sign of convergen ce. There is evidence of a growth slow-down between the 1970s and 1980s. Hu man capital also significantly enhances growth.