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Linking public investment to private investment

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Abstract

Literature describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over period 1965-1997. We use a crowding-out theoretical framework and panel data methodology. The results show a positive effect of productive and social public investment (especially in education) on private investment. The spillover effects generated by productive infrastructures located in other regions do not seem to encourage private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2001/04Revision.

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Length: 25 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:cea:doctra:e2001_04revision

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Keywords: Crowding-out; regional economics; investment; panel data.;

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  1. Aschauer, David Alan, 1988. "The Equilibrium Approach to Fiscal Policy," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 20(1), pages 41-62, February.
  2. Mehdi S. Monadjemi, 1996. "Public Expenditure And Private Investment: A Study of Three OECD Countries," Studies in Economics, Department of Economics, University of Kent 9601, Department of Economics, University of Kent.
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  7. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda, Federal Reserve Bank of Chicago 88-10, Federal Reserve Bank of Chicago.
  8. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 32(3), pages 1176-96, September.
  9. Khalifa Ghali, 1998. "Public investment and private capital formation in a vector error-correction model of growth," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 30(6), pages 837-844.
  10. Bhargava, A & Franzini, L & Narendranathan, W, 1982. "Serial Correlation and the Fixed Effects Model," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 533-49, October.
  11. Aschauer, David Alan & Greenwood, Jeremy, 1985. "Macroeconomic effects of fiscal policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 23(1), pages 91-138, January.
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  13. Isabel Argimon & Jose Gonzalez-Paramo & Jose Roldan, 1997. "Evidence of public spending crowding-out from a panel of OECD countries," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(8), pages 1001-1010.
  14. Pradhan, B. K. & Ratha, D. K. & Sarma, Atul, 1990. "Complementarity between public and private investment in India," Journal of Development Economics, Elsevier, Elsevier, vol. 33(1), pages 101-116, July.
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Cited by:
  1. Ghassan, Hassan B. & Alhajhoj, Hassan R., 2009. "اختبار أثر مزاحمة الإنفاق الحكومي للإستثمار الخاص في الاقتصاد السعودي عبر المعاينة المعادة
    [Crowding out Test of Govern
    ," MPRA Paper 54453, University Library of Munich, Germany, revised 2009.

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