The Effects of Public Investment on Private Investment in Developing Economies
The literature on the impact of public investment in developing economies gives inconsistent results on whether it complements or crowds out private investment. Applying several pooled specifications of a standard investment model to a panel of developing economies for 1980 to 1997, this study finds that public investment complements private investment, and that, on average, a 10 percent increase in public investment is associated with a 2 percent increase in private investment. The results also indicate that private investment is constrained by the availability of bank credit in developing economies. The same empirical models are run on a panel of developed economies. In contrast to developing economies, public investment crowds out private investment in developed economies. The results show that in a number of important ways, private investment in developed economies is influenced by different factors than private investment in developing economies.
Volume (Year): 33 (2005)
Issue (Month): 5 (September)
|Contact details of provider:|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Salmon, Mark H, 1982.
"Error Correction Mechanisms,"
Royal Economic Society, vol. 92(367), pages 615-629, September.
- Salmon, Mark, 1982. "Error Correction Mechanisms," The Warwick Economics Research Paper Series (TWERPS) 199, University of Warwick, Department of Economics.
- Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
- Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
- J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
- John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
- James D. Gwartney & Robert A. Lawson & Randall G. Holcombe, 1999. "Economic Freedom and the Environment for Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 643-643, December.
- Guncavdi, Oner & Bleaney, Michael & McKay, Andrew, 1998. "Financial liberalisation and private investment: evidence from Turkey," Journal of Development Economics, Elsevier, vol. 57(2), pages 443-455.
- Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
- Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
- Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
- Pindyck, Robert S., 1990. "Irreversibility, uncertainty, and investment," Working papers 3137-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- 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.
- Reinhart, Carmen & Khan, Mohsin, 1989. "Private investment and economic growth in developing countries," MPRA Paper 13655, University Library of Munich, Germany.
- Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
- M. O. Odedokun, 1997. "Relative effects of public versus private investment spending on economic efficiency and growth in developing countries," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1325-1336.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
- Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
- Khan, Mohsin S & Kumar, Manmohan S, 1997. "Public and Private Investment and the Growth Process in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 69-88, February.
- Nader Nazmi & Miguel D. Ramirez, 1997. "Public And Private Investment And Economic Growth In Mexico," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 65-75, 01.
- Scully, Gerald W & Slottje, Daniel J, 1991. "Ranking Economic Liberty across Countries," Public Choice, Springer, vol. 69(2), pages 121-152, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:33:y:2005:i:5:p:575-602. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.