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Public investment and regional growth and convergence: Evidence from Greece

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  • Andrés Rodríguez-Pose

    ()
    (IMDEA Social Sciences)

  • Yannis Psycharis

    (Panteion University)

  • Vassilis Tselios

    (University of Groningen)

Abstract

This paper estimates the impact of public investment on regional economic growth and convergence at the NUTS III level in Greece. Using a new database of public expenditure per region for the period 1978-2007, it proposes a model which captures not just the impact of public investment in Greek prefectures, but also the spillover effects related to the existence of externalities from neighbouring regions. The results point to a positive long-run impact of public investment per capita on regional economic growth – but not on convergence – which also generates considerable spillover effects. However, the returns vary according to different types of public investment, with education and infrastructure spillovers having the highest impact. In general, public investment externalities seem to be more relevant for regional growth than direct public investment in each region. Finally, the impact of different types of public investment in Greece is mediated by politics and political factors, but the effect of politics disappears once we control for political-period-specific spatial-invariant variables.

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Bibliographic Info

Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2012-05.

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Date of creation: 25 Apr 2012
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Publication status: Published in Papers in Regional Science 91(3), August 2012: 487-513
Handle: RePEc:imd:wpaper:wp2012-05

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Keywords: public investment; economic growth; spillover effects; convergence; spatial econometrics; regional economics; regional policy; Greece;

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