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Abstract The paper revisits the empirical investment literature, which has established that aggregate business fixed investment is not found to be related linearly to marginal or average Tobin's q. The theoretical background is extended here by developing a supply‐side model where the depreciation rate of private capital is determined endogenously. The firm can either invest in 'new' capital, which adds directly to the existing capital stock at the presence of convex adjustment costs, or extend the durability of installed capital through maintenance expenditure, which affects its depreciation rate. The model shows that Tobin's q is then a positively related sufficient statistic for both components of aggregate capital expenditures. This central implication is tested empirically using aggregate time‐series survey data from Canada on 'new' investment and maintenance expenditures covering the period 1956–93. The estimated relationships produce significant and plausible parameter estimates for the structural parameters of the q model.

Abstract This paper examines theoretically and empirically the effects of public investmentrules on output growth in an economy with private and public capital. It is shownthat the decisions on public capital formation are closely associated with the growthrate of output and generate endogenous growth. A permanent change in the policyrule implies a new long‐run growth rate of output, but the economy will onlygradually approach the new steady‐state due to adjustment costs in private capitalaccumulation. The model predictions are tested using data from Canada for theperiod 1955‐1999. The data support the endogenous growth hypothesis and thetwo central assumptions of the model: (i) the growth rate of output follows closelythe rate of infrastructure formation and (ii) private capital formation also followsthe rate of infrastructure formation but adjusts with a delay.

This paper examines theoretically & empirically the effects of public investment rules on output growth in an economy with private & public capital. It is shown that the decisions on public capital formation are closely associated with the growth rate of output & generate endogenous growth. A permanent change in the policy rule implies a new long-run growth rate of output, but the economy will only gradually approach the new steady-state due to adjustment costs in private capital accumulation. The model predictions are tested using data from Canada for the period 1955-1999. The data support the endogenous growth hypothesis & the two central assumptions of the model: (i) the growth rate of output follows closely the rate of infrastructure formation & (ii) private capital formation also follows the rate of infrastructure formation but adjusts with a delay. 2 Tables, 3 Figures, 31 References. Adapted from the source document.

Structural Funds: Growth, Employment and the Environment is a book on the role of transfers designed for assisting sustainable development of less developed regions within the European Union. The book places special emphasis on the future path of the Greek economy and discusses likely outcomes -related directly to the impact of these transfers- in: Growth and macroeconomic convergence Employment in key sectors of the economy Energy demand and its environmental aspect The book uses macroeconomic modelling and modern applied econometric techniques to analyze these issues, thus offering a coherent methodological framework for their presentation. To this extent, Structural Funds: Growth, Employment and the Environment can serve to: Academic researchers and economists in recipient countries who can gain a better understanding of how national authorities can best design and implement the strategic allocation and utilization of these funds to maximize the benefits for the domestic economy Policymakers in the European Union by offering a sound and rigorously elaborated treatment which can be applied as an estimation and comparison tool for the effects of Structural Funds both at the national and the international level Economists in Eastern European countries which are at the pre-accession stage and will be eligible for this type of transfers in the near future

This paper studies the role of Ramsey taxation under the assumption that the individual rate of time preference is determined by the publicly provided social level of education. We show how intertemporal complementarities of aggregate human capital can generate multiple equilibria and we examine the role of endogenous fiscal policies in equilibrium selection. Our analysis implies a lower optimal government size due to the effect of human capital on time preference.

This paper assesses the productivity effects of infrastructure's operations and maintenance (O&M) spending by state and local governments in the 48 contiguous U.S. states over the period 1978-2000. We explicitly account for transboundary spillovers of capital and O&M spending and follow a semiparametric methodology that allows us to estimate state-specific output elasticities. We find strong evidence that in all 48 states the cross-state spillover effects of O&M outlays on productivity exceed their within-state impacts and are substantially higher than the spillover effects of capital expenditures.

Foreign aid flows have increased considerably during the last decades, targeting, apart from development objectives, goals related to democracy. In this paper we investigate whether aid has affected the political regime of recipient countries. To this end, we use annual data on Net Official Development Assistance covering 64 aid-recipients. Because of data limitations, we cover the 1967-2002 period. We find that aid flows decreased the likelihood of observing a democratic regime in a recipient country. This effect is sensitive to economic and social conditions. The negative relation between aid and democracy is moderated when aid flows are preceded by economic liberalization. Aid from the U.S. has a non-significant effect on the political regime of recipients. [Copyright Elsevier B.V.]

We investigate whether democratic aid flows, which are directed toward the democratization of recipients by covering democracy‐related programs and government and civil society activities, affect the future political regime of recipient countries. We introduce a multinomial multivariate logit model and we use 5‐yr averaged data covering the period 1972–2004 for 59 democracy aid‐recipient countries categorized into three broad classes according to the prevalent political regime. We find strong evidence that democratic aid flows are positively associated with the likelihood of observing a partly democratic or a fully democratic political regime in democratic aid‐recipient countries and that this result is robust to the potential endogeneity of democratic assistance.(JEL D70, F35, C25)