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Public Investment and Fiscal Performance in the New EU Member States

  • Jan Hanousek
  • Evžen Kočenda

In this paper we analyze the dynamics of public investment and public finance in new members of the European Union, and also how these sectors were affected by changes in economic freedom and corruption. In terms of public finance (deficit and debt) we detect mostly improvement when there is less economic regulation. However, the effect of corruption with respect to public finance is not that conclusive. When we assess the role of regulation and corruption on public investment, we find that reductions in corruption as well as improvements in economic freedom tend to be associated with decreases in public investment. Further, we show that a rise in public investment often serves as an impetus for an increase in corruption.

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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 32 (2011)
Issue (Month): 1 (03)
Pages: 43-71

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Handle: RePEc:ifs:fistud:v:32:y:2011:i::p:43-71
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