THE EFFECTS OF PUBLIC INVESTMENT ON PRIVATE INVESTMENT IN DEVELOPING ECONOMIES


ERDEN L. , Holcombe R. G.

PUBLIC FINANCE REVIEW, cilt.33, sa.5, ss.575-602, 2005 (ESCI İndekslerine Giren Dergi) identifier identifier

  • Cilt numarası: 33 Konu: 5
  • Basım Tarihi: 2005
  • Doi Numarası: 10.1177/1091142105277627
  • Dergi Adı: PUBLIC FINANCE REVIEW
  • Sayfa Sayıları: ss.575-602

Özet

The literature on the impact of public investment in developing economies gives inconsistent results on whether it complements or crowds out private investment. Applying several pooled specifications of a standard investment model to a panel of developing economies for 1980 to 1997, this study finds that public investment complements private investment, and that, on average, a 10 percent increase in public investment is associated with a 2 percent increase in private investment. The results also indicate that private investment is constrained by the availability of bank credit in developing economies. The same empirical models are run on a panel of developed economies. In contrast to developing economies, public investment crowds out private investment in developed economies. The results show that in a number of important ways, private investment in developed economies is influenced by different factors than private investment in developing economies.