Public investment multipliers in EU countries: Does the efficiency of public sector matter?

Papaioannou, Sotiris (2016): Public investment multipliers in EU countries: Does the efficiency of public sector matter?

Abstract

This study examines whether differences in public sector efficiency are associated with diverging effects of public investment on growth. At first stage, we estimate public investment multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we construct measures of public sector efficiency which are used in the econometric analysis to study the relationship between public investment and growth. The main result of the econometric analysis is that the efficiency of public sector indeed matters in raising the influence of public investment on growth. This result remains robust to several changes in the econometric specification and to various measures of government efficiency which used as explanatory variables in the econometric estimations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public investments, Fiscal multipliers, Public sector efficiency, Economic growth.
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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