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Public investment and fiscal performance in new EU member states

Author

Listed:
  • Jan HANOUSEK
  • Evžen KOČENDA

Abstract

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.

Suggested Citation

  • Jan HANOUSEK & Evžen KOČENDA, 2010. "Public investment and fiscal performance in new EU member states," Departmental Working Papers 2010-007, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2010-007
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    More about this item

    Keywords

    Public finance; public investment; economic freedom; corruption; EU convergence and integration; macroeconomic policy; fiscal reforms; new EU members;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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