Economic growth effects of public and private investment: evidence from dynamic
Economic growth effects of public and private investment: evidence from dynamic

Summary/Abstract: We examine the growth effects of public and private investment by using data for a largesample of countries. For the full sample, our dynamic panel estimations indicate that bothpublic and private investment have strong positive effects on growth. Our estimationsfor income levels also show that the impacts of both public and private investment arepositive and statistically significant for developing countries. Interestingly, public andprivate investment promote growth in developing countries with effective and ineffectivegovernments. It seems that countries can significantly benefit from investment regardlessof their institutional quality levels. Furthermore, the effect of public investment generallyappears to be larger than that of private investment. Given the robust relationship betweeninvestment and growth in both ineffective and effective developing countries, an importantpolicy implication of our study is that both types of investment should be encouragedto foster economic growth.

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