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Evidence of public spending crowding-out from a panel of OECD countries

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  • Isabel Argimon
  • Jose Gonzalez-Paramo
  • Jose Roldan

Abstract

The empirical relationship between government spending and private investment is examined, using a panel of 14 OECD countries. The evidence suggests the existence of a significant crowding-in effect of private investment by public investment, through the positive impact of infrastructure on private investment productivity. Moreover, government consumption appears to crowd out private investment. The implications of these results are of foremost importance when it comes to fiscal consolidation. Deficit reductions engineered through cuts in public investment could severely impinge on private capital accumulation and growth prospects.

Suggested Citation

  • 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.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:8:p:1001-1010
    DOI: 10.1080/000368497326390
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    References listed on IDEAS

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