A simple endogenous growth model with productive public capital is used to investigate the degree to which observed fiscal policies in eight Organisation for Economic Co-Operation and Development (OECD) countries can account for slowdowns in the growth rates of aggregate labor productivity since 1970. In model simulations, it is found that none of the observed public capital policies can generate slowdowns of sufficient magnitude to match those in the data. For most countries in the sample, the simulation that combines the observed public capital policy with the observed tax policy does a better job of accounting for the slowdowns than either policy in isolation.
