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Evidence of public spending crowding-out from a panel of OECD countries

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  • Isabel Argimon
  • Jose Gonzalez-Paramo
  • Jose Roldan
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    Abstract

    The empirical relationship between government spending and private investment is examined, using a panel of 14 OECD countries. The evidence suggests the existence of a significant crowding-in effect of private investment by public investment, through the positive impact of infrastructure on private investment productivity. Moreover, government consumption appears to crowd out private investment. The implications of these results are of foremost importance when it comes to fiscal consolidation. Deficit reductions engineered through cuts in public investment could severely impinge on private capital accumulation and growth prospects.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/000368497326390
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 29 (1997)
    Issue (Month): 8 ()
    Pages: 1001-1010

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    Handle: RePEc:taf:applec:v:29:y:1997:i:8:p:1001-1010

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    1. Michael Marlow, 1986. "Private sector shrinkage and the growth of industrialized economies," Public Choice, Springer, vol. 49(2), pages 143-154, January.
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    10. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
    11. Robert J. Barro, 1989. "A Cross-Country Study of Growth, Saving, and Government," NBER Working Papers 2855, National Bureau of Economic Research, Inc.
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    13. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
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