Summary of Public Investment as an Engine of Growth

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Public Investment as an Engine of Growth  summary
Big increases in public investment may not accelerate long-term economic growth in low-income countries.

Rating

7 Overall

8 Importance

7 Innovation

7 Style

Recommendation

Governments generally promote public investment in infrastructure development projects as a catalyst for sustainably faster economic growth. But Andrew M. Warner, an economist at the International Monetary Fund, says that economic slumps are more likely to follow public investment drives in low-income countries. Inadequate or corrupt implementation can undermine even the most promising civic undertaking. Diminishing returns on investment and irrational or nonexistent project screening and selection are just a few of the problems Warner highlights in a series of dated but illuminating case studies on past government investment programs in Mexico, Bolivia, South Korea, the Philippines and Taiwan. getAbstract suggests this well-researched report to economists, development specialists and analysts as an alternative point of view on state investment in capital projects. Those seeking a deeper understanding of public capital investments and their presumed role as economic growth catalysts will find much to ponder in this evaluation.

In this summary, you will learn

  • How governments justify and promote public investments
  • Why publicly funded projects aren’t effective long-term economic stimulants
  • What unintended consequences can result from government-spurred capital projects
 

Summary

Public Investments and Economic Growth
The belief that public capital investment leads to higher rates of economic growth is a foundational feature of the “big push models” of infrastructure development that emerged in the 1940s, 1950s and 1960s. These models imply that a critical mass...
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About the Author

Andrew M. Warner is an economist at the International Monetary Fund.


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