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A Sub-national Perspective on Financing Investment for Growth I - Measuring Fiscal Space for Public Investment: Influences, Evolution and Perspectives


  • Claudia Hulbert
  • Camila Vammalle



Sub-national governments are key players for public investment, as they are responsible on average for 62% of total public investment in OECD countries. This article analyses the different factors affecting sub-national governments’ fiscal space for public investment. It proposes an indicator for measuring this fiscal space and analyses the evolution of its different components over 2007-2012. The article shows that the global financial crisis and the ensuring consolidation drive have reduced sub-national governments’ fiscal space for public investment, through a downward pressure on revenues, increased expenditure obligations, and constrained capacity to borrow or issue debt on financial markets. Les gouvernements infra-nationaux sont des acteurs majeurs de l'investissement public dans les pays de l'OCDE, et représentent en moyenne 62% de l'investissement public total. Cet article analyse les déterminants de la marge de manoeuvre budgétaire disponible pour l'investissement public infra-national. Il propose un indicateur pour mesurer cette marge de manoeuvre, et analyse l'évolution de ses composantes entre 2007 et 2012. La crise et les plans de rigueur introduits dans de nombreux pays ont réduit l'espace budgétaire des gouvernements infra-nationaux disponible pour l'investissement. Ceci s'explique à la fois par une baisse des revenus infra-nationaux, une hausse des dépenses ainsi que par une plus grande limitation dans leur accès à l'emprunt bancaire ou à l'emprunt sur les marchés financiers.

Suggested Citation

  • Claudia Hulbert & Camila Vammalle, 2014. "A Sub-national Perspective on Financing Investment for Growth I - Measuring Fiscal Space for Public Investment: Influences, Evolution and Perspectives," OECD Regional Development Working Papers 2014/2, OECD Publishing.
  • Handle: RePEc:oec:govaab:2014/2-en
    DOI: 10.1787/5jz5j1qk8fhg-en

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    Cited by:

    1. Andrés Rodríguez-Pose & Roberto Ganau, 2022. "Institutions and the productivity challenge for European regions," Journal of Economic Geography, Oxford University Press, vol. 22(1), pages 1-25.
    2. Mr. Olumuyiwa S Adedeji & Mr. Calixte Ahokpossi & Claudio Battiati & Mrs. Mai Farid, 2016. "A Probabilistic Approach to Fiscal Space and Prudent Debt Level: Application to Low-Income Developing Countries," IMF Working Papers 2016/163, International Monetary Fund.
    3. Desislava Zheleva Kalcheva, 2017. "Interrelationship Between Public Investments and Economic Developement in the EU Counties," Business & Management Compass, University of Economics Varna, issue 3, pages 281-290.
    4. Agnieszka Kozera, 2021. "Investment Activity of Large Cities - Regional Centres in Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 220-247.

    More about this item


    fiscal relations across levels of government; fiscal space; gouvernements infra-nationaux; institutions; institutions; investissement public; marge de manoeuvre budgétaire; public investment; public services; relations budgétaires entre niveaux de gouvernement; services publics; sub-national government;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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