Public and private investment in the United States and Canada

Abstract

Using data for both the US and Canada, I examined private and public investment during the last four decades to determine what support there is, if any, for the crowding in hypothesis. Based on neo-classical theories of investment, simple VAR models of private and public investment behaviour are used to examine the short- and long-run interactions between these variables. For both countries there is no evidence of crowding in due to complementarities between public and private investment; in fact, innovations to public investment tend to crowd out private investment.