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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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number
02-19.
Find related papers by JEL classification: H50 - Public Economics - - National Government Expenditures and Related Policies - - - General H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
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