Report

Government production of investment goods and aggregate labor productivity

Abstract: In this paper, I estimate the impact on aggregate labor productivity of having government, rather than private industry, produce investment goods. This policy was pursued to varying degrees by Egypt, India, Turkey, among others. The policy has a large impact because there is both a direct effect (on the production function in the investment sector) and a secondary effect (on the economy-wide capital stock per worker). I estimate that this policy alone accounted for about one-third of Egypt's aggregate labor productivity gap with the United States during the 1960s.

Keywords: Labor productivity;

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 1997

Number: 240