The productivity effect of government capital in developing and industrialized countries

Abstract

This paper uses an aggregate production function to examine the effect of government capital formation on growth of labour productivity in an annual panel of 12 developing and 12 OECD economies covering the period 1976–1989. The results from a pooled model of all 24 countries indicate that contribution of government capital to labour productivity is positive and statistically significant. This result also holds in separate samples of the industrialized and developing economies where we find that, while there are productivity differentials between the two types of economies with respect to private capital, there are no differences with regards to public capital.