Government saving should properly include government-financed investment. Changes in public tangible investment and investment in education are found to be positively related to changes in inflation-adjusted, structural deficits. Changes in these deficits have also been associated with changes in the same direction in gross private domestic investment and even changes in narrow measures of national saving. Hence, changes in real deficits have been associated a fortiori with changes in the same direction in a broader measure of national saving, including government and household investment in tangible capital. Our data also suggest that the pay-off to more public tangible investment, at least, is distinctly positive and very possibly larger than that to more private investment. © 1994.
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