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Determinants of public capital spending in less-developed countries

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  • Sturm, Jan-Egbert

    (Groningen University)

Abstract

Abstract In a great majority of countries throughout the world productive government services have declined as percentage of GDP since the 1970s. In the macroeconomic literature this is often associated with the general productivity growth decline, suggesting an important role for infrastructure investment in economic growth. However, this also raises the question as of why public capital spending declined in so many countries. Surprisingly, hardly any research on this exists. This paper is one of the first attempts to fill this gap by testing various hypotheses that may explain the development of government capital spending using panel data for 123 non-OECD countries for the period 1970{1998. Politico-institutional variables, like ideology, political cohesion, political stability and political business cycles do not seem to be important when explaining government capital formation in less-developed economies. On the other hand, variables like public decits, private investment and foreign aid are significantly related to public capital spending.

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Bibliographic Info

Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200107.

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Date of creation: 2001
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Handle: RePEc:dgr:rugccs:200107

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References

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  1. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  2. Edin, P-A. & Ohlsson, H., 1990. "Political Determinants Of Budget Deficits: Coalition Effects Versus Minority Effects," Papers 1990k, Uppsala - Working Paper Series.
  3. Borensztein, Eduardo, 1990. "Debt overhang, credit rationing and investment," Journal of Development Economics, Elsevier, vol. 32(2), pages 315-335, April.
  4. Savvides, Andreas, 1995. "Economic growth in Africa," World Development, Elsevier, vol. 23(3), pages 449-458, March.
  5. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  6. Jan-Egbert Sturm, 2000. "No Need to Run Millions of Regressions," CESifo Working Paper Series 288, CESifo Group Munich.
  7. Schuknecht, Ludger, 2000. " Fiscal Policy Cycles and Public Expenditure in Developing Countries," Public Choice, Springer, vol. 102(1-2), pages 115-30, January.
  8. Oshikoya, Temitope W, 1994. "Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 42(3), pages 573-96, April.
  9. Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
  10. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  11. Jakob Haan & Jan Sturm & Bernd Sikken, 1996. "Government capital formation: Explaining the decline," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(1), pages 55-74, March.
  12. Jan-Egbert Sturm & Jakob De Haan, 1998. "Public capital spending in The Netherlands: developments and explanations," Applied Economics Letters, Taylor & Francis Journals, vol. 5(1), pages 5-10.
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Cited by:
  1. Grigoli, Francesco & Mills, Zachary, 2011. "Do high and volatile levels of public investment suggest misconduct ? the role of institutional quality," Policy Research Working Paper Series 5735, The World Bank.
  2. Daido, Kohei & Tabata, Ken, 2013. "Public infrastructure, production organization, and economic development," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 330-346.
  3. Busilac, Aileen Jean & Deluna, Roperto Jr, 2013. "The Relationship between Population Dynamics and Investments for Energy and Telecommunication Infrastructures in the Philippines," MPRA Paper 51845, University Library of Munich, Germany.
  4. 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.
  5. Sanz, Ismael & Velazquez, Francisco J., 2007. "The role of ageing in the growth of government and social welfare spending in the OECD," European Journal of Political Economy, Elsevier, vol. 23(4), pages 917-931, December.
  6. Clémence Vergne, 2011. "Democracy, Elections and Allocation of Public Expenditure in Developing Countries," Working Papers halshs-00564572, HAL.
  7. Toan Quoc Nguyen & Benedict J. Clements & Rina Bhattacharya, 2003. "External Debt, Public Investment, and Growth in Low-Income Countries," IMF Working Papers 03/249, International Monetary Fund.

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