Public Investment in Transportation Infrastructure and Economic Performance in Portugal

In this paper, we use a VAR approach to investigate the effects of public investment in transportation infrastructures on private investment, employment, and output in Portugal. Estimation results suggest that public investment crowds in private investment and employment, and has a strong positive effect on output. We estimate that one euro in public investment increases output in the long‐term by 9.5 euros, which corresponds to a rate of return of 15.9%. These figures imply that there are strong long‐term budgetary benefits from public investment in the form of increased future tax revenues. A closer look at the effects of different types of public investment uncovers the same general patterns. These results are very important from a public policy perspective. They suggest that the strategy followed by the Portuguese authorities of investing in public infrastructures is justified, both from a long‐term development perspective and a long‐term public budgetary perspective.     

DISCOUNT RATE FOR PUBLIC INVESTMENT IN A MONETARY DISEQUILIBRIUM ECONOMY*

In this paper, we explore the social rate of discount for public investment in a monetary overlapping generations model which allows for market disequilibria arising from price and wage rigidities. Financing public investment with a lump-sum tax on the younger generation, borrowing and money supply, the government maximizes the sum of generational utilities discounted by a social rate of time preference. For the social welfare optimum, it is required to take the boundary-maintaining policy by making demand for output equal to supply. In a stationary state, we show that (i) the social rate of discount on the Keynesian-repressed inflation boundary should be the weighted average of the social rate of time preference and the market rate of interest, the weights depending on the amount of private investment crowded out by public investment, and (ii) on the Keynesian-classical boundary it should be a modified version of the weighted average rule, containing an extra term which represents the marginal opportunity cost of public investment through its impact on labour employment.     

Crowding-in and crowding-out effects of public investments in the Portuguese economy

This study analyses the effects of public and private investment on Portuguese GDP in the period 1960–2013. After a review of the literature based on works developed in the context of VAR analyses, an alternative econometric strategy is proposed. We opt for ADL models using the methodology of Krolzig-Hendry-Doornik. We estimate direct effects of public and private investments on themselves and also a system of simultaneous equations and calculate the multipliers of the exogenous variables, represented by the current external transfers, the short-run nominal interest rate and public debt ratio. Additionally, we tested a model with the first three equations of the system, using beyond those variables the real exchange rate as an exogenous variable. The results point to the existence of a complementarity between private investment and public investment rather than any idea of substitutability. We find that public debt has important negative effects on public and private investments and consequently on output. Public investment has positive effects on output and on private investment. The appreciation of the real exchange rate has an important and long-lasting negative effect upon output, confirming the presence of a mechanism associated with a Dutch-disease phenomenon in the Portuguese economy.     

Public investment and budgetary consolidation in Portugal

In this paper we find that public investment in durable goods has a positive effect on long-term economic performance in Portugal. We also find that these positive effects are not strong enough for public investment to pay for itself in the form of future tax revenues. Therefore, cuts in public investment in durable goods, although costly in terms of long-term economic performance seem to be an effective way of alleviating pressure on the public budget. It is important to note, however, that this general result contrasts sharply with the evidence found in this paper for public investment in equipment, a small component of public investment in durable goods, as well as with evidence elsewhere for public investment in transportation infrastructures. For these, the effects on output are strong enough for public investment to pay for itself. Therefore, cuts in these two types of public investment, would have negative long-term economic effects as well as negative long-term budgetary effects. Clearly, not all public investment is created equal. We would like to thank the editor as well as two anonymous referees for unusually useful comments and suggestions. The usual disclaimers apply.     

Putting Austerity to Bed: Technical Progress,Aggregate Demand and the Supermultiplier

ABSTRACT

The paper investigates the determinants of private investment and economic growth from a theoretical perspective. We start with a critical analysis of the crowding-out effect and we present a new version of the Sraffian Supermultiplier: a model that accounts for both the multiplier and accelerator effects. We focus on different types of fiscal policies: generic ones and ‘mission-oriented’ ones that set a new direction for the economy. We show that mission-oriented policies have the potential to generate the largest positive effect on investments and output growth as well as on innovation processes and labour productivity growth.     

Is there a Laffer curve between aggregate output and public sector employment?

This paper develops a model of the relationship between public sector employment, total output and aggregate real demand in market prices, where public employment has a positive productivity effect on private output. Public employment crowds out private employment and output because its increase induces higher wages and taxes. The valuation of government output is also taken into account. While public employment affects total output and aggregate real demand in an a priori ambiguous way, numerical simulations suggest that the relationship may be nonlinear; positive, when public sector is “small” and negative, when it is “large”. Using the annual data from 22 OECD countries over the period 1960–1996 and estimating and testing for threshold models and more commonly used specifications with multiplicative interaction terms give support to this nonlinearity hypothesis between public employment and private sector output. First version received: October 1996/Final version received: April 2000     

中国省级公共投资的区域效应:互利共赢还是以邻为壑

文章通过构建VAR模型考察了省级公共投资对就业和产出的动态效应。实证结果表明:区域间公共投资的就业效应更多地表现为以邻为壑;而产出效应则主要体现为互利共赢。在就业效应方面,本地区公共投资对超过半数地区(16/26)的就业产生挤入效应;而区域外公共投资则对多数地区(18/26)的就业产生挤出效应。从公共投资总就业效应看,公共投资促进了以北京、上海、广东为中心的三大就业地带的形成。在产出效应方面,本地区公共投资对17/26的地区的产出产生挤入效应;而区域外公共投资仅对3/26的地区的产出产生挤出效应。     

Public Capital Formation and Regional Development in Spain

This paper uses a vector autoregression (VAR) approach to evaluate the effects of public investment on private sector performance in Spain. Empirical results suggest that public investment positively affected private investment, employment, and output at both aggregate and regional levels. The regions that benefited the most from public investment in the last two decades were Cataluña, Madrid, and Pais Vasco. These regions are among the largest economic areas in the country and among the ones with the highest GDP per capita. Accordingly, public investment, while an important factor for aggregate economic growth, has also been a source of increasing regional asymmetries.     

公共资本投资、内生经济增长与合理政府债务规模*

本文基于一个具有内生增长机制的三部门世代交叠模型,讨论了政府举债为公共投资进行融资时经济的长期均衡;同时,通过数值模拟方法考察了我国的均衡政府债务规模及其影响因素。结果表明：在特定条件下,经济系统存在一个正的均衡政府债务-产出比重,该债务比重水平明显受到公共投资—产出比重、公共投资的债务融资比重、民间资本产出弹性等参数的影响。但是,均衡政府债务比重并不是无限上升的,当上述参数超过特定临界值时,经济系统无法达到均衡,政府债务-产出之比将持续上升,财政将不可持续。另外,当民间资本产出弹性较低时,较高的均衡政府债务比重可能导致经济运行动态无效率。数值模拟结果还显示,基于不同的假设情形,我国的均衡政府债务-产出比重均在不同程度上高于当前实际的政府债务规模,这为我国在未来期间实施扩张性财政政策提供了有利的依据。     

Public Investment and Economic Performance in Highly Indebted Poor Countries: An Empirical Assessment

Understanding how public investment affects economic performance in highly indebted low‐income countries is crucial in order to implement effective fiscal policies for adjustment with growth. In this paper we provide an empirical analysis to investigate the relationship between public investment, private investment and output. A dynamic econometric procedure is implemented on a selected group of Highly Indebted Poor Countries (HIPCs). Our results provide empirical support for the crowding‐in hypothesis and a positive relation between public investment and output.     

EMPIRICAL IMPACT OF PUBLIC INFRASTRUCTURE ON THE JAPANESE ECONOMY*

We study the impact of public capital investment on individual sectors of the Japanese economy using time‐series data for the period of 1970–1998. We employ a production function approach and also estimate a dynamic VAR/ECM model. We find significant differences in the employment effects, output effects and private investment effects across sectors. Public capital investment has a positive effect on employment in the finance, insurance and real estate (FIRE), manufacturing, construction and utilities sectors; on private investment in the FIRE, agriculture, transportation, trade and services sectors; and on output in the mining, FIRE, trade and manufacturing sectors.     

Welfare Analysis of a Fiscal Reconstruction Policy in an Overlapping Generations Economy with Public Investment

Constructing an endogenously growing overlapping generations model with public investment, we examine the welfare effects of a fiscal reconstruction policy. In this paper we define a fiscal reconstruction policy as a policy where the government reduces its spending level without changing the tax revenue and allocates the surplus of the revenue to redeem public debt. We show that if government spending is not productive it is possible that a fiscal reconstruction policy improves the utilities of both the current and future generations, while if government spending is productive it can harm the utilities of both generations. Received February 26, 2002; revised version received July 8, 2002 Published online: February 17, 2003     

Forms of Explanation; Rethinking the Questions in Social Theory

The aim of this study is to investigate whether the so-called crowding in effects of complementarity or the crowding out effects of substitution occurred between public investment and private investment in Brazil from 1982 to 2013. This will be carried out through a theoretical debate on the investment general dynamics and an econometric analysis of vector error correction (VEC) model for the Brazilian case. The trajectory of the Brazilian economy and the empirical results show the presence of crowding in between public and private investments in the period, in accordance with the Post-Keynesian approaches. The crowding in is justified by the effects on demand via the Keynesian multiplier and via the expansion of the domestic market (particularly provided by infrastructure) and by the effects on the supply of private capital through the reduction of production costs, the increase in productivity, and through structural changes facilitated by public policy. Complementarity with regard to both the investments of the public administration and of federal government-owned/controlled enterprises is confirmed. Furthermore, a significant causal relationship is observed between public investment and the output of industrial manufacturing, which, from the structuralist perspective, is a sector that is considered a driving force of the economy. The special contributions of this paper are its time series for public investment and the variety of models that show crowding in between public and private investment.     

On the impact of shock persistence on the dynamics of a recursive economy

The present note relies exclusively on numerical computation of a parametric version of a (stochastic) version of the one-sector neoclassical growth model to derive the qualitative properties of the optimal consumption/investment policy functions and of the resultant steady state, and to study the manner in which these properties are affected by an increase in the degree of shock persistence. In particular, we measure the effects of (differing degrees of) shock persistence on the means and variances of the resulting (stationary) distributions on output, consumption, and capital stock. Furthermore, we explore the effects of increasing degrees of shock persistence on the dynamic time path of the economy.     

Investment in Swedish manufacturing: Analysis and forecasts

This paper uses a neoclassical investment model extended with installation costs for capital, agency costs for investment financing, and the possibility of the firm being output constrained as a framework for an empirical analysis of investment behaviour in the Swedish manufacturing industry. The theory is implemented within a multivariate error-correction approach on data covering the time period 1951 to 1995, and we gain the following main results: (1) Tobins average Q is not the sole determinant of investment, neither in the short nor in the long run, and other variables like real output and capital gearing also affect investment activity; (2) the out-of-sample forecasts of the model track the evolution of actual investment growth quite impressively, especially at short- and medium-term horizons (1–2 years); (3) a relative equity-price variable is shown to constitute a good approximation of average Q, both for empirical modelling in general and forecasting in particular.Jel classification: C32, E22, E27We would like to thank Bob Chirinko, Stefan Palmqvist, Anders Vredin, seminar participants at Sveriges Riksbank, and two anonymous referees for helpful comments. Thanks also to Jan Södersten, Uppsala University, who provided us with most of the data for this analysis. All correspondence to Per Jansson.First version received: July 2000/Final version received: November 2002     

IS GOVERNMENT SPENDING STIMULATIVE?

This paper develops and implements a neoclassical model of fiscal policy. The paper's main empirical hypothesis is that government non-military investment spending is more expansionary than is either government consumption or military investment. The paper utilizes annual data to support the hypothesis. It finds that output "multipliers" for government non-military investment significantly exceed unity while multipliers for government consumption and military investment lie below unity. The paper also finds that public sector deficits—both actual and cyclically adjusted—contain minor explanatory power for output when one controls for the effects of non-military investment.     

公共投资与宏观经济结构的实证研究

运用协整分析、误差修正模型、脉冲响应函数和方差分解计量分析工具,对我国公共投资与宏观经济结构的关系进行了实证研究。研究结果表明:公共投资与三次产业总产值均具有长期正向均衡关系,其中对第三产业的正效应最大,第一产业最弱;三次产业总产值对公共投资冲击的长期响应为正;公共投资对第一、三产业总产值增长误差的解释能力弱于第二产业,但均不显著。为此提出,调整公共投资产业结构,增加农业、科技创新、教育卫生、社会福利等支持力度是促进产业结构调整内在推动力的积极建议。     

Input and output additionality of R&D subsidies

This article analyses the effects of public R&D subsidies on R&D input and output of German firms. We distinguish between the direct impact of subsidies on R&D investment and the indirect effect on innovation output measured by patent applications. We disentangle the productivity of purely privately financed R&D and additional R&D investment induced by the public incentive scheme. For this, a treatment-effect analysis is conducted in a first step. The results are implemented into the estimation of a patent production function in a second step. It turns out that both purely privately financed R&D and publicly induced R&D show a positive effect on patent outcome.     

基本公共服务均等化对拉动内需的作用分析

在美国金融危机的影响下,我国推进基本公共服务均等化有利于拉动我国内需,提高居民消费支出和投资系数促进人力资本积累,进而拉动实体经济.通过增加基本公共服务的投资,加大对农村的扶持力度,可进一步推进基本公共服务均等化.     

Incorporating innovation subsidies in the CDM framework: empirical evidence from Belgium

ABSTRACT

This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon–Duguet–Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy-induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy-induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.