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Public Investment in Infrastructure in Latin America: Is Debt the Culprit?

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  • Eduardo Lora

Abstract

Panel data for seven Latin American countries are used to assess the influence of public indebtedness on public investment in infrastructure in the period 1987-2001. Debt increases are associated with higher public infrastructure investment, an effect that is robust to the inclusion of many other fiscal and macroeconomic variables. This paper also finds some evidence of complementarity between public and private investment and of the negative effect of IMF adjustment loans on infrastructure expenditures. No evidence is found that debt defaults affect public investment in infrastructure

Suggested Citation

  • Eduardo Lora, 2007. "Public Investment in Infrastructure in Latin America: Is Debt the Culprit?," Research Department Publications 4502, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4502
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    References listed on IDEAS

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    1. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
    2. Geske Dijkstra & Niels Hermes, 2001. "The Uncertainty of Debt Service Payments and Economic Growth of HIPCs: Is there a Case for Debt Relief?," WIDER Working Paper Series DP2001-122, World Institute for Development Economic Research (UNU-WIDER).
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    5. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 24(1), pages 3-20, Junio.
    6. Lora, Eduardo & Olivera, Mauricio, 2007. "Public debt and social expenditure: Friends or foes?," Emerging Markets Review, Elsevier, vol. 8(4), pages 299-310, December.
    7. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 19-24, January.
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    9. Mahdavi, Saeid, 2004. "Shifts in the Composition of Government Spending in Response to External Debt Burden," World Development, Elsevier, vol. 32(7), pages 1139-1157, July.
    10. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 24(1), pages 3-20, Junio.
    11. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 19-24, January.
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    Cited by:

    1. Pradyumna Dash, 2016. "The Impact of Public Investment on Private Investment: Evidence from India," Vikalpa: The Journal for Decision Makers, , vol. 41(4), pages 288-307, December.
    2. Yang, Bofei & Zhu, Shengjun, 2022. "Public funds in high-tech industries: A blessing or a curse," Socio-Economic Planning Sciences, Elsevier, vol. 83(C).
    3. Patenema Ouedraogo, 2022. "The Impact Of Public Debt On The Sustainability Of The Economy," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 334-350.
    4. Rozas, Patricio, 2010. "Latin America: problems and challenges of infrastructure financing," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    5. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 24(1), pages 3-20, Junio.
    6. Cavallo, Eduardo A. & Serebrisky, Tomás & Frisancho, Verónica & Karver, Jonathan & Powell, Andrew & Margot, Diego & Suárez-Alemán, Ancor & Fernández-Arias, Eduardo & Marzani, Matías & Berstein, Solang, 2016. "Saving for Development: How Latin America and the Caribbean Can Save More and Better," IDB Publications (Books), Inter-American Development Bank, number 7677, November.
    7. Cavallo, Eduardo & Daude, Christian, 2011. "Public investment in developing countries: A blessing or a curse?," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 65-81, March.
    8. Khan, Muhammad Arshad & Rahman, Abdul & Tareen, Bashir Ahmed, 2025. "Is Pakistan in a debt trap? Do domestic and foreign debts crowd-out private investment?," Journal of Policy Modeling, Elsevier, vol. 47(5), pages 1076-1096.
    9. Ramón Espinasa, 2008. "Prospects for the Oil-importing Countries of the Caribbean," Research Department Publications 2007, Inter-American Development Bank, Research Department.
    10. Eduardo Lora, 2007. "The Fiscal Vulnerability of Social Public Expenditure: Is Latin America Different?," Research Department Publications 4505, Inter-American Development Bank, Research Department.
    11. repec:agr:journl:v:4(605):y:2015:i:4(605):p:189-198 is not listed on IDEAS
    12. Anis Chowdhury, 2012. "Structural Adjustment and Crises –Which Way Now?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(1), pages 85-118, April.
    13. Dongmin Yao & Yijing Chen & Yixuan Xu, 2021. "How Public Expenditure and Bank Credit Affect Growth: Provincial and Enterprise Level Causal Evidence from China's 2008 Wenchuan Earthquake," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 195-231, May.
    14. Walid BENAYED & Foued Badr GABSI & Samia OMRANE BELGUITH, 2015. "Threshold Effect of Public Debt on Domestic Investment: Evidence from Selected African Countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(605), W), pages 189-198, Winter.
    15. Timilsina,Govinda R. & Sahoo,Pravakar & Dash,Ranjan Kumar, 2022. "Why Do Indian States Differ in Their Infrastructure Development ?," Policy Research Working Paper Series 10086, The World Bank.
    16. Ibrahim Mohammed Adamu, 2016. "Public Investment in Nigeria. Does External Debt Matter?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(4), pages 120-138, December.
    17. Eduardo A. Cavallo & Tomás Serebrisky & Verónica Frisancho & Jonathan Karver & Andrew Powell & Diego Margot & Ancor Suárez-Alemán & Eduardo Fernández-Arias & Matías Marzani & Solange Berstein & Marian, 2016. "Saving for Development: How Latin America and the Caribbean Can Save More and Better," IDB Publications (Books), Inter-American Development Bank, number 94597 edited by Eduardo A. Cavallo & Tomás Serebrisky, February.

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