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Macroeconomic Rates Of Return Of Public And Private Investment: Crowding-In And Crowding-Out Effects

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  • ANTÓNIO AFONSO
  • MIGUEL ST. AUBYN

Abstract

Using annual data from 17 developed economies, we evaluate the macroeconomic effects of public and private investment through a five-variable vector autoregression. From impulse response functions, we assess the extent of crowding-in or crowding-out of both components of investment. We also compute the associated macroeconomic rates of return of public and private investment for each country. The results show the existence of positive effects of public investment and private investment on output. On the other hand, the crowding-in effects of public investment on private investment vary across countries, while the crowding-in effect of private investment on public investment is more generalized. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 77 (2009)
Issue (Month): s1 (09)
Pages: 21-39

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Handle: RePEc:bla:manchs:v:77:y:2009:i:s1:p:21-39

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References

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  1. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
  2. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  3. Isabel Argimon & Jose Gonzalez-Paramo & Jose Roldan, 1997. "Evidence of public spending crowding-out from a panel of OECD countries," Applied Economics, Taylor and Francis Journals, vol. 29(8), pages 1001-1010.
  4. Yang Zou, 2006. "Empirical studies on the relationship between public and private investment and GDP growth," Applied Economics, Taylor and Francis Journals, vol. 38(11), pages 1259-1270.
  5. Christophe Kamps, 2004. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," Kiel Working Papers 1224, Kiel Institute for the World Economy.
  6. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
  7. Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
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Citations

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Cited by:
  1. António Afonso & Miguel St. Aubyn, 2010. "Public and private inputs in aggregate production and growth - a cross-country efficiency approach," Working Paper Series 1154, European Central Bank.
  2. António Afonso & Davide Furceri, 2008. "Government size, composition, volatility and economic growth," Working Paper Series 849, European Central Bank.
  3. António Afonso & Juan González Alegre, 2007. "Economic Growth and Budgetary Components: a Panel Assessment for the EU," Working Papers 2007/29, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  4. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," GEMF Working Papers 2011-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
  5. Anita Tuladhar & Markus Bruckner, 2010. "Public Investment as a Fiscal Stimulus: Evidence from Japan's Regional Spending During the 1990s," IMF Working Papers 10/110, International Monetary Fund.
  6. António Afonso & João Tovar Jalles, 2011. "Linking Investment and Fiscal Policies," Working Papers 2011/16, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  7. António Afonso & João Tovar Jalles, 2012. "The Fiscal-Growth Nexus," Working Papers 2012/01, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  8. António Afonso, 2013. "Anatomy of a fiscal débacle: the case of Portugal," Working Papers 2013/01, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..

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