Kellermann, Kersten2025-02-202025-02-202022978-363188140-8978-363186406-7https://hdl.handle.net/20.500.12846/1805The issue of insufficient public investment has drawn attention since Aschauer (1989) published his landmark paper about the effects of public investments on productivity. However, to assess the level of public investment, it is necessary to consider not only aspects of productivity but also aspects of efficiency. This paper therefore uses an intertemporal welfare model to deduce an applicable public investment rule that can indicate suboptimal public investment levels. The rule states that a welfare-maximizing government invests up to the point where the net marginal productivity of public capital equals the marginal social discount rate. The social discount rate is approximated using the long-term interest rate. The marginal productivity of public capital is therefore expected to move with the interest rate. However, the data shows that over the past three decades, the gap between the net marginal productivity of public capital and the interest rate has widened significantly. In Germany, it reached 19 percentage points in 2017. © Peter Lang GmbH.eninfo:eu-repo/semantics/closedAccessinvestment rulepublic capital hypothesesPublic investmentssocial discount ratesub-optimalityBook Part2432592-s2.0-85143449802