Credibility of Government’s Commitment and Aggregate Productivity
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Trade liberalization can enhance aggregate industry productivity through selection effect. We shed light on the same effect of public capital investment on industry. Expansion of public capital investment can inspire firm’s self-adjustment for innovation. In case that public capital investment is complementary to private investment, opportunity cost for firm’s additional investment should be reduced. To competitively take the advantage, firms try an earlier and strategic response to commitment of the public capital investment. However, commitment risks a problem of incredibility. Possibility of a credibility problem can counteract the positive effect of the commitment for enhancement of aggregate industry productivity. This paper contributes to both research areas of public capital and aggregate productivity. Specially, it willdiscuss how commitment and credibility for public investment clock-wisely affect private investment for innovation and eventually enhance aggregate industry productivity. According to the study, not only trade liberalization but also commitment of public investment can help firms to self-adjust.
Abstract
Trade liberalization can enhance aggregate industry productivity through selection effect. We shed light on the same effect of public capital investment on industry. Expansion of public capital investment can inspire firm’s self-adjustment for innovation. In case that public capital investment is complementary to private investment, opportunity cost for firm’s additional investment should be reduced. To competitively take the advantage, firms try an earlier and strategic response to commitment of the public capital investment. However, commitment risks a problem of incredibility. Possibility of a credibility problem can counteract the positive effect of the commitment for enhancement of aggregate industry productivity. This paper contributes to both research areas of public capital and aggregate productivity. Specially, it willdiscuss how commitment and credibility for public investment clock-wisely affect private investment for innovation and eventually enhance aggregate industry productivity. According to the study, not only trade liberalization but also commitment of public investment can help firms to self-adjust.
참고문헌 (14)
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