Prague Economic Papers 2021, 30(5):613-631 | DOI: 10.18267/j.pep.781

Economic Growth Effects of Public and Private Investment: Evidence from Dynamic Panel Estimation for Developed and Developing Countries

Taner Turan ORCID...a, Halit Yanikkaya ORCID...b, Hüseyin A. Özer ORCID...b
a Çukurova University, Department of Economics, Sarıcam/Adana, Turkey
b Gebze Technical University, Department of Economics, Gebze/Kocaeli, Turkey

We examine the growth effects of public and private investment by using data for a large sample of countries. For the full sample, our dynamic panel estimations indicate that both public and private investment have strong positive effects on growth. Our estimations for income levels also show that the impacts of both public and private investment are positive and statistically significant for developing countries. Interestingly, public and private investment promote growth in developing countries with effective and ineffective governments. It seems that countries can significantly benefit from investment regardless of their institutional quality levels. Furthermore, the effect of public investment generally appears to be larger than that of private investment. Given the robust relationship between investment and growth in both ineffective and effective developing countries, an important policy implication of our study is that both types of investment should be encouraged to foster economic growth.

Keywords: Growth, public and private investment, GMM, developing and developed countries, institutions
JEL classification: C33, E22, O47

Received: August 27, 2020; Revised: June 1, 2021; Accepted: June 30, 2021; Prepublished online: August 11, 2021; Published: October 22, 2021  Show citation

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Turan, T., Yanikkaya, H., & Özer, H.A. (2021). Economic Growth Effects of Public and Private Investment: Evidence from Dynamic Panel Estimation for Developed and Developing Countries. Prague Economic Papers, 30(5), 613-631. doi: 10.18267/j.pep.781
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