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Public Investment in Europe: Evolution and Determinants in perspective

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  • Aaron Mehrotra
  • Timo Välilä

Abstract

We describe the evolution of public investment and public capital stocks in Europe over the past three decades. Against this background, we analyse the macroeconomic determinants of public investment, with a special focus on its long-term trend. We find that public investment has been determined by national income, the stance of budgetary policies and fiscal sustainability considerations. Neither the cost of financing nor the fiscal rules embodied in EMU have had a systemic impact on public investment. The significant downtrend that characterises the evolution of public investment in non-cohesion countries is chiefly determined by drawn-out episodes of fiscal consolidation, unrelated to EMU. Copyright Institute for Fiscal Studies, 2006.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 27 (2006)
Issue (Month): 4 (December)
Pages: 443-471

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Handle: RePEc:ifs:fistud:v:27:y:2006:i:4:p:443-471

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Citations

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Cited by:
  1. António Afonso & João Tovar Jalles, 2011. "Linking Investment and Fiscal Policies," Working Papers Department of Economics 2011/16, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Juan González Alegre, 2012. "An evaluation of EU regional policy. Do structural actions crowd out public spending?," Public Choice, Springer, vol. 151(1), pages 1-21, April.
  3. Stančík, Juraj & Välilä, Timo, 2010. "changes in the fiscal stance and the composition of public spending," Economic and Financial Reports 2010/2, European Investment Bank, Economics Department.
  4. Andreas Kappeler & Albert Solé-Ollé & Andreas Stephan & Timo Välilä, 2012. "Does Fiscal Decentralisation Foster Regional Investment in Productive Infrastructure?," Discussion Papers of DIW Berlin 1204, DIW Berlin, German Institute for Economic Research.
  5. Pellervo Hamalainen, 2009. "Review of literature on the productivity of public capital," Discussion Papers 55, Aboa Centre for Economics.
  6. Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.
  7. Yongzheng Liu, 2014. "Does competition for capital discipline governments? The role of fiscal equalization," International Tax and Public Finance, Springer, vol. 21(3), pages 345-374, June.
  8. Gomes, Pedro & Pouget, Francois, 2008. "Corporate tax competition and the decline of public investment," Working Paper Series 0928, European Central Bank.
  9. Kappeler, Andreas & Välilä, Timo, 2008. "Fiscal federalism and the composition of public investment in Europe," European Journal of Political Economy, Elsevier, vol. 24(3), pages 562-570, September.
  10. Peree, Eric & Valila, Timo, 2007. "A Primer on Public Investment in Europe, Old and New," Economic and Financial Reports 2007/1, European Investment Bank, Economics Department.
  11. Pedro Gomes & Davide Debortoli, 2012. "Labor and Profit Taxation, and the Supply of Public Capital," 2012 Meeting Papers 325, Society for Economic Dynamics.
  12. Pedro Gomes & Francois Pouget, 2008. "Corporate Tax Competition and the Decline of Public Investment," CESifo Working Paper Series 2384, CESifo Group Munich.
  13. Lorena Viñuela, 2014. "Trends and Quality of Decentralized Public Investment," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1407, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  14. Inklaar, Robert & Yang, Jing, 2012. "The impact of financial crises and tolerance for uncertainty," Journal of Development Economics, Elsevier, vol. 97(2), pages 466-480.

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