This paper estimates the effect of government investment on private investment in a sample of 39 low-income countries. The analysis finds that an extra dollar of government investment raises private investment by roughly two dollars and output by 1.5 dollars.
Understanding growth is crucial to understanding the relative merits of government interventions in international trade, financial markets, health and education, public infrastructure, and governance. Ongoing research seeks to achieve a deeper understanding of the mechanisms that translate policy actions and reforms into growth.
