Crowding-in Effect Research Articles

Better to Give Than to Receive: Impact of Adding a Donation Scheme to Reward-Based Crowdfunding Campaigns

The choice funding scheme is an important design dimension in crowdfunding for which platforms should not assume that they are restricted to the use of one funding scheme. In particular, we find that the addition of a donation scheme can increase the success rate of reward campaigns substantially, especially those with prosocial causes. In addition, the donation received is found to have a crowd-in effect on subsequent contributions. To get the most out of donation schemes, crowdfunding sites should provide features that help backers locate reward campaigns for prosocial causes, for example, by providing tags or search filters related to prosocial causes. Second, campaign owners should take steps to highlight the prosocial aspects of their crowdfunding campaign, for example, by revising campaign descriptions to include prosocial keywords/tags. Third, campaign owners should play a more active role in encouraging early donations to enjoy the crowd-in effect that could help their campaigns reach the targeted funding amount. Specifically, the owner’s direct social network is a potentially good source for soliciting these early donations. Relatedly, the campaign owners could benefit by spreading the word about the early donations they receive so as to generate a greater crowd-in effect at later phases of the crowdfunding process.

Public disclosure and private information acquisition: A global game approach

This paper studies public information disclosure in a model of dynamic financial markets with endogenous information acquisition. Due to an information complementarity, multiple equilibria may emerge, complicating comparative statics analysis. By adding noise to agents' information costs, we establish equilibrium uniqueness using global-game techniques. We show that while public information always crowds out private information in all underlying equilibria, it can crowd in private information acquisition in the unique global-game equilibrium. This result is driven by the strategic uncertainty introduced through the global-game refinement. The crowding-in effect is more pronounced when there is a high level of fundamental uncertainty, which supports the case for greater information disclosure during times of increased market volatility.

Regional aspects of financial development and renewable energy: A cross-sectional study in 214 countries

Renewable energy is one of the most promising technologies for developing sustainable energy systems. This paper presents empirical evidence on the finance-green energy nexus. We use an extensive database on financial development (depth, access, efficiency, stability) from 1960 to 2017 for 214 countries, providing the first, to our knowledge, comprehensive empirical investigation on all four dimensions. We show macroeconomic and energy development conditions (public/social awareness and willingness, policy and legal framework, fossil fuels orientation, energy sector competition) are crucial to leverage financing and improve financing conditions for renewable energy entrepreneurs. Our empirical findings show that the financial system in East Asia and the Pacific is a significant constraint for investments in sustainable technologies. The cost of capital and debt, as well as the cost of equity and assets, for green investors, is commonly 30% higher than for non-green investors. Our findings support the crowding-in effect for South Asia. Here we supply empirical knowledge on the policymakers’ and investors (governments, institutions, markets) goals, policies, and instruments targeting green financing and sustainable development.

Limiting the Crowding Out Effect of Macroeconomic Variables- An Empirical Study of India

Purpose: To use the empirical findings to advocate policies intended to enhance the crowding-in effects and to limit the crowding-out effects. The article analyses macroeconomic variables while controlling fiscal and monetary variables, focusing primarily on the relationship between capital formation and public debt in India. Methods: The research uses a multiple regression model to evaluate long-run and short-run investment flows within a dynamic catalyst theoretical perspective. We employ a core sequence of financials statistics that includes improved organized management sector coverage. Findings: Our findings imply that, if the amount is invested effectively, capital formation and economic expansion go hand in hand. Public investment encourages private counterparts in both the long and short runs, barring industry-level short-term crowding-out in the industrial and financial services sectors. Fiscal imbalance, implied macroeconomic variables, and sovereign susceptibility, however, have a negative impact on capital formation. However, when the government sector invests in extraction and production but less in infrastructure, the long-term crowding-out impact of budget deficit is quantitatively higher. Implication: Significant infrastructure spending as a percentage of total government spending would lessen the negative effects of the deficit on capital formation. Furthermore, sound fiscal reforms and control of the consumer price index would boost the private investment market.

Intratemporal elasticity of substitution between private and public consumption: new evidence and implications.

This paper estimates the intratemporal elasticity of substitution (IES) between private and public consumption in private utility. Using panel data for 17 European countries over 1970-2018, we estimate the IES to lie between 0.6 and 0.74. When combined with the relevant intertemporal elasticity of substitution, our estimated IES implies that private and public consumption are Edgeworth complements. The panel estimate, however, conceals a large heterogeneity where the IES ranges from as low as 0.3 in Italy to 1.3 in Ireland. This suggests that the crowding-in (out) effect of fiscal policies involving change in government consumption will differ across countries. This cross-country variation in the IES is positively correlated the share of health spending in public expenditure but negatively correlated with the share of public order and safety in government expenditures. We also find a U-shape relationship between the size of IES and government size.

Private sector debt overhang and government spending multipliers: Not all debts are alike

This study empirically examines whether government spending multipliers vary depending on the level of debt in the private sector by estimating an interacted panel vector autoregressive model (IPVAR) with unbalanced panel data from 29 OECD countries. Results reveal that (i) government spending multipliers become larger in private debt overhang; (ii) and not all debts are alike: empirical evidence on the larger multipliers in household debt overhang are mixed, while the larger multipliers in firm debt overhang are clear; (iii) in firm debt overhang, positive government spending strongly crowds in both private consumption and investment compared comparing with low firm debt periods, and the multipliers are larger than one; and (iv) in household debt overhang, those crowding-in effects, particularly the effects on private consumption, are not as strong. I investigate various private debt-dependent transmission channels of government spending, including the labor and financial markets. Differences in the behavior of the labor market and investment decision across firm debt overhang and household debt overhang may be important for understanding the empirical results.

Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment

This paper develops a micro-founded general equilibrium model of payments to study the impact of a central bank digital currency (CBDC) on intermediation of private banks. If banks have market power in the deposit market, a CBDC can enhance competition, raising the deposit rate, expanding intermediation, and increasing output. A calibration to the US economy suggests that a CBDC can raise bank lending by 1.57% and output by 0.19%. These crowding-in effects remain robust, albeit with smaller magnitudes, after taking into account endogenous bank entry. We also assess the role of a non-interest-bearing CBDC as the use of cash declines.

Correlated lending to government and the private sector: what do we learn from the Great Recession?

PurposeThe purpose of the study is to investigate the correlation between credit supply to government and credit supply to the private sector to determine whether there is a crowding-out or crowding-in effect of credit supply to government on credit supply to the private sector.Design/methodology/approachThe study used data from 43 countries during the 1980–2019 period. The study employed the Pearson correlation methodology to analyze the data.FindingsThere is a significant positive correlation between credit supply to government and credit supply to the private sector. There is also a significant positive relationship between credit supply to government and credit supply to the private sector, implying a crowding-in effect of government borrowing on private sector borrowing. The positive correlation between credit supply to government and credit supply to the private sector by banks is stronger and highly significant in the period before the Great Recession, while the positive correlation is weaker and less significant during the Great Recession, and the correlation further weakens after the Great Recession. The regional analyses show that the positive correlation between credit supply to government and credit supply to the private sector by banks is stronger and highly significant in the African region than in the Asian region and the region of the Americas.Originality/valueThere is no evidence on the correlation between credit supply to government and credit supply to the private sector during the Great Recession.

FOREIGN AND PRIVATE DOMESTIC INVESTMENTS IN INDONESIA: CROWDING-IN OR CROWDING-OUT?

This study aims to investigate the empirical relationship between Foreign Direct Investment (FDI) to Private Domestic Investment (PDI) in Indonesia by using quarterly data from 1990Q2 to 2020Q2. It tests the crowding-in effect (which suggests complementarity between FDI and PDI) and crowding out effect (which indicates asubstitution effect between FDI and PDI) at the sectoral level. Our results imply the prevalence of the crowding-in effect in the primary and secondary sectors, with the tertiary sector exhibiting a neutral relationship. No rational reason was observed for the restriction of foreign investment. Therefore, it is suggested that Indonesia’s government needs to actively engage in FDI to increase the growth of new investments in the primary and secondary sectors of the domestic economy.

Does Public Debt and Investments Create Crowding-out Effect in Turkey? Evidence from ARDL Approach

The impact of public sector debt composition on the private sector is a matter of curiosity. This article explores the crowding-out effect of public debt and public investment on private investment in Turkey from 1975 to 2020, utilising the ARDL method. The findings reveal that public investment, public domestic debt stock, and external debt service create a crowding-out effect; on the other hand, the public external debt stock has a crowding-in effect on private sector investments. In this study, the crowding-out effect of public debt, which has not been directly related to private sector investments in the literature, is tried to be examined.

Crowding-out: Government & private investment analysis

This study examines the crowding-out effect in Albania from 2000 to 2022, specifically investigating the relationship between government investment (GI) and private investment (PI). Using time series data for gross domestic product (GDP), GI, PI, and real interest rates (RI), we applied the Johansen cointegration test and vector error correction model (VECM) to analyse the long-run and short-run relationships among these variables. Our results indicate a significant long-run correlation between GI and PI, suggesting that increased government investment in Albania leads to reduced private investment, demonstrating the crowding-out effect. Moreover, we observe a positive connection emerges between real interest rates and private investment. Consistent with prior research, Funashima and Ohtsuka (2019) identified both crowding-out and crowding-in effects in Japan, echoing our findings. Similarly, Bedhiye and Singh (2022) noted a negative correlation between government and private investment in developing economies. These findings have critical implications for policymakers, underscoring the potential negative consequences of government investment on private investment and economic growth. Effective policy implementation necessitates a delicate equilibrium between government investment and its potential adverse effects. In summary, this study offers valuable insights into government-private investment interactions in Albania, highlighting the crowding-out effect and the influence of real interest rates. These insights contribute to informed policymaking for sustainable economic growth.

Public Spending and Private Sector Investment: An investigation of the Crowding-in (or-out) Effect amidst deteriorating Fiscal Balance

Public Spending and Private Sector Investment: An investigation of the Crowding-in (or-out) Effect amidst deteriorating Fiscal Balance

Remittances, crowd-in effect, and household welfare

Migrant remittances are associated with consumption smoothing and poverty reduction. However, the effect of migrant remittances on non-remittance income is not clear. Moreover, remittance cost is often implicit in analysing the impact of remittances on welfare. Disentangling cost environments allows us to minimize the potential bias arising from the implicit factors that might explain the observed heterogeneous welfare outcomes. This study aims to investigate the potential crowd-in effect of remittance flows on recipient households’ alternative incomes, controlling for remittance transaction costs. We use data for 4,079 households from one of the most expensive remittance corridors in Southern Africa and employ the Inverse Propensity Weighting approach to compare the welfare outcomes of treatment (recipient) and control (non-recipient) households. The results show a 2% increase in the welfare of treatment households, with an associated crowding in of non-remittance income streams. Households that receive remittances report investing in business that increase alternative streams of income, going beyond spending on consumption. Further, remittances have a potential multiplier effect, as they are associated with a 4% reduction in poverty. Our results back the welfare-enhancing role of remittances beyond one period, through building secure and sustainable futures. This is evidence of the contribution of personal remittances to economic development from the “bottom”, hence a motivation for reducing remittance costs in expensive corridors.

Do the Inward and Outward Foreign Direct Investments Spur Domestic Investment in Bangladesh? A Counterfactual Analysis

The net contribution of the decomposed measures of foreign direct investment (FDIs), e.g., the inward and outward flows of FDIs, to domestic investment is still inconclusive in the case of underdeveloped and developing countries. The current literature bears testimony to this fact. Hence, this research examines the impact of inward and outward foreign direct investments (FDIs) on the domestic investment in Bangladesh. This study considers annual time series data from 1976 to 2019 and estimates this data property under the augmented ARDL approach to cointegration. In addition, this research employs the dynamic ARDL simulation technique in order to forecast the counterfactual shock of the regressors and their effects on the dependent variable. The results from the augmented ARDL method suggest that the inward FDI has a positive impact on domestic investment, while the outward FDI is inconsequential in both the long run and the short run. Besides, our estimated findings also show the economic growth’s long-run and short-run favorable effects on domestic investment. At the same time, there is no significant impact of real interest rates and institutional quality on domestic investment in the long run or the short run in Bangladesh. In addition, the counterfactual shocks (10% positive and negative) to inward FDI positively impact domestic investment, indicating the crowding-in effect of the inward FDI on the domestic investment in Bangladesh. As the inward FDI flow is a significant determinant for sustained domestic investment in Bangladesh, the policy strategy must fuel the local firms by utilizing cross-border investment.

Keeping up with the Joneses and the consumption response to government spending

A key empirical regularity regrading the effect of fiscal policy is that private consumption tends to increase in response to a hike in government spending. In this paper, we provide an explanation for this stylized fact based on the notion of Keeping Up with the Joneses (KUJ), another empirical observation well documented in the literature. • We study the effects of government spending shocks on private consumption in the presence of consumption externalities. • We show that keeping up with the Joneses is a necessary condition to generate positive consumption multipliers. • We derive the necessary and sufficient conditions in the static model under which positive consumption multipliers arise. • We provide numerical examples in static and dynamic models for the crowd-in effect of government spending on consumption.

Voluntary Precision Disclosure and Endogenous Market Feedback

We explore a manager’s incentives to disclose the precision of a signal about firm profitability. Voluntary disclosure of precision information encourages traders to acquire private information, increasing price informativeness and improving the firm’s investment efficiency. We highlight a novel tradeoff: on the one hand, more precise public information crowds out traders’ information acquisition by leveling the playing field. On the other hand, there can also be a crowding-in effect because high-precision disclosures indicate greater managerial confidence and higher investment, which increases the traders’ value of information. The crowding-in effect can dominate if the firm discloses above-average profitability. We derive testable predictions regarding the financial market consequences of supplemental disclosures that are informative about the precision or relevance of payoff-related signals. This paper was accepted by Brian Bushee, accounting.

Does foreign investment crowd in domestic investment? Evidence from Vietnam

This paper examines the linkages between foreign and domestic investment at sector level in a transitional economy. Using System Generalized Method of Moments estimation on a strong balanced dataset covering all sectors across the country, our results consistently suggest that foreign direct investment in Vietnam positively motivates domestic private investment in the same sector. Examination of the linkages finds evidence of crowding-in effects from foreign investment on domestic private investment in downstream sectors that have strong linkages with foreign investment in upstream sectors. No significant impact is found in upstream domestic investment that has linkages with foreign investment in downstream sectors. State-owned investment and joint-venture investment by foreign and domestic investors have a generally negative effect on the investment behavior of private investors. Domestic private investment in export-oriented sectors appears to be more responsive to the presence of foreign investment in both upstream and downstream sectors through vertical linkages. • This paper examines the linkages between foreign and domestic investment at sector level in Vietnam over the period 2010–2015. • Our results consistently suggest that foreign direct investment in Vietnam positively motivates domestic private investment in the same sector. • In particularly, we find evidence of crowding-in effects from foreign investment to domestic private investment in the downstream sectors that have strong linkages with foreign investment in upstream sectors. • There is no significant impact found in terms of upstream domestic investment that has linkages with foreign investment in downstream sectors. State-owned investment and joint-venture investment involving foreign and domestic investors have a generally negative impact on the investing behavior of private investors. • Domestic private investment in export-oriented sectors appears to be more responsive to the presence of foreign investment in both upstream and downstream sectors through vertical linkages.

Investments in environmental preservation: is the government crowding in green enterprises? Evidence from a-listed companies in China

Government investment in environmental protection (Govin) plays a key role in stimulating private green investment (Prinv) to preserve the ecological environment with economic profits. To examine the effect of Govin on Prinv, this study uses data from 2010 to 2020 on green A-listed companies in China and estimates a dynamic panel model by using both the difference generalized method of moments and system generalized method of moments. The results indicate that Govin has a crowding-in effect on Prinv, and this conclusion is confirmed by several robustness tests. Furthermore, we identify revenues as a potential mechanism variable to explain how Govin affects Prinv. In addition, this study finds regional and enterprise ownership differences in the crowding in effect of Chinese Govin. Finally, based on these outcomes, the study suggests that the government should rationally and dynamically adjust the contents of public environmental investment and optimise its structure to effectively promote the development of green, low-carbon, and circular economies.

Does the debt-growth link differ across private and public debt? Evidence from China

Deleveraging has been one of China's announced policy goals since 2015 due to the high debt-to-GDP ratio. Although China's private debt and public debt differ widely in level and usage, the literature overlooks the difference in their impacts on economic growth in China. We fill this research gap by separately investigating the private and public debt-growth link with the Max Share method. Our results show that private debt has inverted U-shaped effects on both investment and TFP, thus growth, which provides new evidence that excessive inflows of capital into real estate and financial assets could crowd out manufacturing investment and hinder innovation. In contrast, public debt still has a positive and linear effect on growth due to the crowding-in effect of public investment on private investment. Finally, this paper suggests focusing more on reducing private debt for China's deleveraging.

PUBLIC, PRIVATE AND FOREIGN INVESTMENT NEXUS IN THE REPUBLIC OF NORTH MACEDONIA: CROWDING-IN OR OUT EFFECT?

The levelsof investments in North Macedonia have beenperceived for a long time assub-optimal, with significant capital budget bias, with regularly overestimated plans vs. outturn. The research problem elaborated is whether the structure of investments matters. Thus the objectiveof the article is to examine if there is a complementarity or substitutability between public and private investment, as well as the role of foreign direct investments in this nexus. Within the paperthe hypothesis of existence of crowding-in or crowding-out effectof the public investmentand foreign direct investment exert over private investment in North Macedoniais tested. The crowding-in and –out effect is tested with an autoregressive distributed lag bound testing. The results indicate crowding-out effect of public over private investments,with significanceof the foreign direct investments variable and at the same time crowding-in effect of foreign direct investments over private domestic investments. The crowding-out effect is immediate and short run.The results imply of a need for closer examination of the fiscal policies for public investment with efforts for improved public investment performance processes.