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Macroeconomic Rates Of Return Of Public And Private Investment: Crowding-In And Crowding-Out Effects


Using annual data from 17 developed economies, we evaluate the macroeconomic effects of public and private investment through a five-variable vector autoregression. From impulse response functions, we assess the extent of crowding-in or crowding-out of both components of investment. We also compute the associated macroeconomic rates of return of public and private investment for each country. The results show the existence of positive effects of public investment and private investment on output. On the other hand, the crowding-in effects of public investment on private investment vary across countries, while the crowding-in effect of private investment on public investment is more generalized. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.

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Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 77 (2009)
Issue (Month): s1 (09)
Pages: 21-39

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Handle: RePEc:bla:manchs:v:77:y:2009:i:s1:p:21-39
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  1. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
  2. Yang Zou, 2006. "Empirical studies on the relationship between public and private investment and GDP growth," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1259-1270.
  3. Roberto Perotti, 2004. "Public investment: another (different) look," Working Papers 277, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  5. Álvaro Manuel Pina & Miguel St. Aubyn, 2005. "How should we measure the return on public investment in a VAR," Working Papers Department of Economics 2005/04, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  6. 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, vol. 29(8), pages 1001-1010.
  7. Miguel ST. Aubyn & Álvaro Pina, 2004. "Comparing Macroeconomic Returns on human and Public Capital: An Empirical Analysis of the Portuguese Case (1960-2001)," Working Papers Department of Economics 2004/07, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  8. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
  9. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
  10. Christophe Kamps, 2004. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," Kiel Working Papers 1224, Kiel Institute for the World Economy.
  11. Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
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