NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Capital Mobility, Public Investment and Economic Growth

Richard H. Clarida

NBER Working Paper No. 4506
Issued in October 1993
NBER Program(s):   IFM

This paper presents a neoclassical model of international capital flows, public investment, and economic growth. Because public capital is non-traded and is imperfectly substitutable for private capital, the open economy converges only gradually to the Solow steady-state notwithstanding the fact that international capital mobility is perfect. Along the convergence path, the economy initially runs a current account deficit that reflects a consumption boom and a surge in public spending. Over time, the rate of public investment declines as does the rate of growth in the standard measure of multifactor productivity in the private sector, the Solow residual.

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Document Object Identifier (DOI): 10.3386/w4506

Published: With Ronald Findlay, published as "After Maastricht: Public Investment, Economic Integration and International Capital Mobility", Economica, Vol. 61, no. 243 (1994): 319-329.

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