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Too much and too fast? Public investment scaling-up and abssoptive capacity

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  • Andrea Filippo Presbitero

    () (International Monetary Fund, Universit… Politecnica delle Marche - MoFiR)

Abstract

A recent trend in several low-income developing countries has been a rapid scaling-up of public investment. It is argued that in the presence of limited absorptive capacity countries are not able - in terms of skills, institutions, management - to translate additional public investment into sustained output growth. We test for the presence of absorptive capacity constraints using a large dataset of World Bank investment projects, approved between 1970 and 2007 in 80 countries. Our results indicate that projects undertaken in periods of public investment scaling-up are less likely to be successful, although this effect is relatively small, especially in poor and capital scarce countries. We also verify that this effect is unrelated to large aid flows and donor fragmentation.

Suggested Citation

  • Andrea Filippo Presbitero, 2015. "Too much and too fast? Public investment scaling-up and abssoptive capacity," Mo.Fi.R. Working Papers 115, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:115
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    Cited by:

    1. Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Ye,Lei Sandy & Islamaj,Ergys, 2017. "Weakness in investment growth : causes, implications and policy responses," Policy Research Working Paper Series 7990, The World Bank.
    2. World Bank Group, 2017. "Global Economic Prospects, January 2017," World Bank Publications, The World Bank, number 25823, July.
    3. Axel Dreher & Valentin F. Lang & Sebastian Ziaja, 2017. "Foreign Aid in Areas of Limited Statehood," CESifo Working Paper Series 6340, CESifo Group Munich.

    More about this item

    Keywords

    Absorptive capacity; Donor fragmentation; Infrastructure; Investment projects; Public investment;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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