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Factor mobility, government debt and the decline in public investment

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  • Friedrich Heinemann

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Abstract

This paper tries to explain the declining level of public investment in OECD countries. The theoretical framework hints to the relevance of a number of demand and supply factors – ranging from the yield of public investment to institutions like the EU deficit limits. The econometric results indicate that the decline is largely due to two developments: First to the pile-up of public debt since the 70s which in the 90s severely restricted ability to finance new investment. Second to the increasing mobility of factors that has added to the financing difficulties. In contrast to that neither the privatisation process nor EU deficit restrictions of the Maastricht Treaty can explain the decline. --

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File URL: http://hdl.handle.net/10.1007/s10368-005-0043-z
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Bibliographic Info

Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 3 (2006)
Issue (Month): 1 (April)
Pages: 11-26

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Handle: RePEc:kap:iecepo:v:3:y:2006:i:1:p:11-26

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Web page: http://www.springerlink.com/link.asp?id=111059

Related research

Keywords: Public investment; Factor mobility; Globalisation; Public debt; OECD; EU; H50; H63; H87;

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  1. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 533-572, October.
  2. Hettich, W. & Winter, S.L., 1993. "The Political Economy of Taxation," Papers 93-2, Carleton - Business Administration.
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  5. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," Scholarly Articles 4553030, Harvard University Department of Economics.
  6. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  7. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
  8. Günther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, 05.
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Cited by:
  1. Kellermann, Kersten, 2007. "Debt financing of public investment: On a popular misinterpretation of "the golden rule of public sector borrowing"," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1088-1104, December.

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