Decline In Public Investment Research Articles

The decline in public investment: ``social dominance’’ or too-rigid fiscal rules?

ABSTRACT Public investment in advanced economies is at historical lows, following a declining trend since the 1980s. Two main hypotheses have been posed to explain this evolution: (i) the ‘social dominance hypothesis’, whereby increased public social spending has been displacing investment from government’s budgets, despite the upward trend witnessed in tax burdens and debt; (ii) fiscal rules’ frameworks, that would have forced governments to reduce investment in their quest for compliance. In this paper, we jointly test the validity of these two duelling explanations using two empirical approaches (panel data models; local projections) for a sample of advanced economies comprising data for the past six decades. We find that both factors are relevant to explain the observed downward trend in investment, with social spending acting as a structural driver, whereas fiscal rules contributed mainly when applied in fiscal consolidation episodes.

Macroeconomic Dynamics of the Total Factor Productivity of the Russian Economy

The growth rate of Russia’s total productivity has been slowing down significantly since 2008. The majority of relevant publications either describe an economic methodology or specifically focus on labour productivity. However, economic growth rates, as well as community welfare, largely depend on total factor productivity. The paper aims to determine the reasons for the slowdown in the growth of total factor productivity after 2008. This negative dynamics was assessed using a macroeconomic econometric model and estimates for Russian regions and types of economic activity. Elasticity of dependent variables was calculated based on econometric equations as well as multipliers of exogenous variables presented in the model. Ordinary and rank correlations between the variables were also examined. The calculations revealed that the stagnation of total factor productivity was caused by the misallocation of resources across industries and regions, de crease in aggregate demand, increase in capital goods prices (primarily due to rouble devaluation) and a slowdown in digital economy development. In turn, these trends were influenced by a decline in public investment and export prices, as well as a slowdown in population growth and liquidity. Simultaneously, growth of the world economy contributed to the demand for Russian export goods, preventing a decrease in productivity. The findings can be used for forecasting Russian economic trends and developing relevant policy measures. Further research will examine the role of human capital, energy intensity, climate and institutional factors in increasing the total productivity.

Development of the toolkit the economic and organizational mechanism for managing the overhaul of the common property of apartment building

Nowadays, the most important task is maintenance and improving of the achieved level of development of the socio-economic living conditions of the population. In the implementation of which the housing policy plays a significant role. It is necessary to improve the management mechanism of the housing complex, the effective use of economic resources, ensuring the preservation and renewal of the housing stock to solve this task. The need for this is also due to the increase in negative processes in the apartment complex. With the development of market relations and the subsequent decline in public investment in the housing complex, the issues of attracting extra-budgetary sources of financing for the construction and reconstruction of housing, the optimal allocation of limited budget resources, and evaluating the effectiveness of the process of updating the housing stock, taking into account the interests of all participants in market relations, are becoming increasingly relevant. Based on this, the article considers the main provisions on capital repairs of the common property of apartment buildings based on the Housing Code of the Russian Federation, analyzes the ways of forming contributions for capital repairs with statistical data. This article contains a number of recommendations aimed at improving the implementation of projects and programs for major repairs of the country’s housing stock. The implementation of the proposed actions will ensure the standard service life of the most important elements and subsystems in the life cycle of each building and the execution of a balanced policy of major repairs of the country’s housing stock.

The Decline in Public Investment: 'Social Dominance' or Too-Rigid Fiscal Rules?

Public investment in advanced economies is at historical lows, and shows a declining trend since at least the 1980s. Two main hypotheses have been posed to rationalize this fact. On the one hand, the “social dominance hypothesis” claims that this is related to structural factors, given the upward social expenditure trends related to ageing populations and social preferences, and the operation of the government budget constraint (limits to further increase significantly tax revenues and public debt, in a context of secular stagnation). On the other hand, another branch of the literature indicates that too-rigid fiscal rule frameworks cause fiscal retrenchment episodes to hinge heavily on public capital expenditure, which does not recover enough in the subsequent expansion, creating a sort of downward hysteresis behaviour in this budgetary item. In this paper we look jointly at both sets of duelling explanatory factors, and show that both are key to understanding public investment dynamics in advanced economies over the past decades.

"Brain drain, brain gain... brain sustain?" Challenges in building portuguese human research capacity

This paper presents a systematic but essentially descriptive account of the policy measure of stimulating human research capacity development under the policy program “Commitment to Science” in Portugal in the period 2006-2009. It explores the conditions that contributed to the development of the policy program and the measure to contract 1000 doctorates to Portuguese public and private research and development (R&D) units, and addresses the outcomes of the program within the overall science and technology policy development in Portugal. The results underline the importance of strategic policy planning and stable funding allocation for the success of policy initiatives. Further, the results indicate that the policy initiative was successful inasmuch as the Portuguese scientific community significantly increased, and also internationalised; however subsequent economic and political austerity hampered the absorption of young researchers into the public and private systems. The previous situation has been reversed since 2011 with a significant and perceivable decline in public investment in research, a decline of budgetary allocations to universities, and the migration of young researchers abroad. The analysis urges the revision of science and technology policy in Portugal and funding mechanisms available to R&D in consideration of the country’s socioeconomic situation, and with respect to other segments of the economic ecosystem.

Improving Public Investment Efficiency in the G-20

Through the provision of both social and economic infrastructure, public investment can serve as an important catalyst for economic growth. A significant body of theoretical and empirical research underscores the positive relationship between investment in high-quality public infrastructure and economy-wide productivity.1 Against the background of a steady decline in public investment as a share of GDP in advanced economies, evidence of infrastructure bottlenecks in emerging economies, and the sluggish global economic recovery, the G-20 has called for ramping up public investment to raise long-run economic growth (G-20, 2014).2 However, the economic and social impact of public investment crucially depends on its efficiency. Despite anecdotal evidence of projects plagued by time delays, cost overruns, and inadequate maintenance, there are few robust empirical studies of the determinants of public investment efficiency. This paper explores the link between public investment management (PIM) institutions and the efficiency of public investment for the G-20 countries. Based on the analysis from a recent IMF study, the paper finds that better PIM enhances public infrastructure quality, and pinpoints key institutional reforms needs to boost public investment efficiency (IMF 2015). These findings and recommendations are based on a comprehensive data set on investment, infrastructure and capital stocks, and two analytical innovations: (i) a new cross-country Public Investment Efficiency Index (PIE-X); and (ii) a new Public Investment Management Assessment (PIMA) which is applied to G-20 countries.

PRIVATE INVESTMENT AND FISCAL POLICY IN PAKISTAN

This paper has examined linear as well as non-linear impact of fiscal policy variables on private investment in Pakistan. The results imply that it's better to examine different aspects of fiscal policy instead of fiscal policy variables in aggregate form as the impact of fiscal policy variables in aggregate and disaggregate form do not comply with each other. Different categories of expenditures and revenues have different impact on private investment. Secondly, in most of the cases there exists a non-linear relationship, which implies the significance of certain threshold level for the different fiscal policy instruments to encourage private investment.Keywords: Fiscal Policy,Private Investment, Non-Linear RelationshipJEL classification: E22, E62(ProQuest: ... denotes formula omitted.)1. INTRODUCTIONThe importance of private investment for growth and development in the developing countries is a well-established fact. Private investment is regarded as an essential element in promoting a broad-based and sustained growth that in turn would help in reducing poverty. Equally important is the response of private investment to changes in economic policies (including fiscal policy) of the government.The economic difficulties faced by many developing countries in the early 1980s (widening current account and balance of payment deficits, rising inflation rates, growing foreign debt burdens, and falling growth rates) forced policy makers to shift development strategies against large-scale government intervention and more towards market for allocating and utilising the resources; along with the increased role of the private sector. Empirical research also has confirmed a much larger role of the private investment in the growth process as compared to the public investment (Reinhart and Khan, 1989).Since the 1980s the general trend seen in most of the developing countries is the decline in public investment as a result of tightening aggregate demand and increasing role of the private sector in capital formation. Furthermore, it is observed that public resources are earmarked for social sectors, that is, for the alleviation of poverty and for the upgrading of social capital and services (Chibber and Dailami, 1991).On the other hand, there exists strong evidence in the favour of fiscal policy and economic growth relationship in the empirical literature. While in this relationship, private investment is regarded as one of the main channels through which fiscal policy can influence economic growth (Hermes and Lensink, 2001). In endogenous growth models changes in the capital stock can affect the long-run per capita growth rate, either through more investment in quantitative terms or through more efficient investment. Therefore, in these models a positive role of economic policies (fiscal policy included) is assumed in the process of economic growth provided these policies aimed at improving the quantity and/ or the efficiency of capital stock. In these models, it is established that some fiscal policy instruments are good and some are bad for growth.The role of private sector in the Pakistan's economy, undoubtedly, is quite significant; not only as a major producer of goods and services, but also as a major contributor in investment, and the largest employer. Its importance can be gauged from the fact that according to one estimate its contribution to total GDP is around 84%. When undocumented informal economy (private sector) is taken into account its contribution to GDP exceeds even further (ADB, 2008). To elaborate it further, in Pakistan's total investment of 15.2% of GDP in 2008-09 the share of private sector investment is around 88%.Pakistan has seen an asymmetrical real GDP growth rate pattern throughout its history, ranging from around 10% in 1969-70 to just 1% in 2008-09. When average for different decades is estimated, it indicate that the private sector-friendly 1960s recorded the highest GDP growth rate of around 7% followed by 5%, 6%, 4%, and 5% in the 1970s, 1980s, 1990s and in the 2000s respectively. …

The Role of Fiscal Policy in Spain from 2007 to 2010 and the Influence of Aggregate Public Spending on Economic Growth

In the early stages of the crisis that is currently affecting the Spanish economy, the fiscal policy that excessively resorted to automatic stabilizers helped overwhelm the deficit and public debt. In this context, first, in this paper we analyse the trend and variation rate of government revenue as well as expenditure on final consumption and government investment in the last 15 years in relation to the business cycle. In another vein, we also explore and quantify the impact of the countercyclical policies provided from 2007 to 2010 and their impact on the tax burden, which enables us to evaluate the stabilizing role of fiscal policy and thus highlight its fragility. Second, given the challenges of budgetary stability facing the Spanish economy, and always based on the above analysis in which we display the limited room for fiscal manoeuvre, we present the effects of aggregate public spending in a systematic and quantified way as well as its composition as an instrument of fiscal policy. In this framework, a long term stable equilibrium relationship is studied, based on two bivariate models that cointegrate econometrically, that is to say, to estimate models for error correction for cointegrated nonstationary series (and ultimately able to anticipate the evolution of the Spanish economy), we estimate and assess the contribution of spending on investment and government final consumption on aggregate output as well as its differential effect, to assess the concrete impact of the measures applied and ultimately the role of fiscal policy implemented in the early years of the crisis and those that will be designed in the future. Finally, the main conclusion given by the model of behaviour for the final consumption expenditure of general government and GDP, is the existence of delayed adverse effects on the rate of growth of public spending on growth rate GDP. Taking into account the response function of GDP for a boost in public consumption, we estimate that with a lag of two years, an increase in the growth rate of public consumption is falling in the rates of change of aggregate output. Moreover, we can also deduce that the delayed effects of the rate of decline in public investment have a negative impact on economic growth.

A Fiscal Policy Framework to Safeguard Public Investment

Fedelino and Hemming analyse different choices of fiscal indicators and targets that are better suited to promoting and safeguarding public investment. After having documented the decline in public investment as a share of GDP in many countries over the last two decades, they note that the empirical evidence on the links between public investment and growth has so far been inconclusive and, furthermore, there is no guarantee that public investment is especially meritorious or productive. The Authors thus propose several “public investment-friendly” approaches to fiscal policy without abandoning the traditional framework based on overall balance and gross debt: broadening the usual set of fiscal indicators and targets, by paying more attention to the current balance; introducing more budgetary flexibility; strengthening the institutional framework for public investment; promoting private sector involvement. They conclude that the best solution to protecting public investment is to implement fiscal policy in a flexible, sustainable and transparent way.

On the determinants of public infrastructure spending in Chinese cities: A spatial econometric perspective

In the context of fiscal decentralization, we use cross-sectional data of 242 Chinese cities in 2005 to explore the major factors contributing to the decline of public investment. The main finding is that a city government appears to reduce its own infrastructure spending as a response to the rise of infrastructure spending of its neighboring cities, revealing evidence of positive spillover effects of public infrastructure expenditure. This paper contributes to the existing literature by providing a new perspective for understanding the decline in public investment. In addition, this paper sheds some light on the ongoing debate on the nature of government competition in China and has important implications for policy makers in making fiscal arrangements among government tiers in a decentralized economy.

The Effect of Government Expenditure on Promoting Livestock GDP and Reducing Rural Poverty in India

India's livestock sector is growing and is playing a vital role in the continent's agricultural economy. The 11th Plan and the National Agricultural Policy have focused on livestock to achieve the target growth rate of 4% in the agricultural sector. However, there has been a decline in public investment in both agriculture and livestock. There is a notion that livestock is a neglected sector in terms of investment, and the distribution of investment is also skewed. This paper looks at the status, growth rates and trends of government spending on animal husbandry and dairy, livestock gross domestic product (GDP), investments in agriculture, agricultural GDP and national GDP. The author assesses the effects of government spending on livestock for promoting livestock GDP and reducing poverty, and suggests policy measures to promote investment in the livestock sector.

Explaining public investment in Western Europe

Budgetary consolidations are considered the obvious explanation for the decline in public investment that most Western European countries experienced over the past three decades. However, regressions based on budgetary variables tend to overpredict public investment during the post-1990 period, i.e. when the budgetary stress eased. We supplement the budgetary consolidation approach to public investment with ideas from behavioural economics to explain why these investments do not increase when additional budgetary resources are available. We use the peak/end evaluation procedure to capture the frustration of voters as cuts in government consumption expenditures accumulate. This ‘memory-effect’ of budgetary consolidations implies that voters recall the previous peak in government consumption expenditures. They remain discontent as long as current expenditures are below the peak value. When the budgetary situation improves, policy makers will choose to increase government consumption because this is electorally more rewarding. Public investment will thus decline when budgetary consolidations are imposed and will remain constant when additional budgetary resources emerge. We test for a memory-effect by introducing expenditure gaps in public investment regressions. These gaps equal the difference between the highest previously observed primary government consumption to Gross Domestic Product (GDP) ratio and the current ratio. The regression results for most EU countries support our assumption.

Factor mobility, government debt and the decline in public investment

This paper aims at explaining the declining level of public investment in OECD countries. The theoretical framework hints to the relevance of a number of demand and supply factors—ranging from the yield of public investment to institutions like the EU deficit limits. The econometric results indicate that the decline is due to three developments: first to the increase in the public capital stock; second to the pile-up of public debt which has restricted the ability to finance new investment; and third to the increasing mobility of factors adding to the financing difficulties. In contrast to that neither the privatisation process nor EU deficit restrictions of the Maastricht Treaty have a robustly significant impact.

Land rights, gender equality and household food security: Exploring the conceptual links in the case of India

This paper seeks to critically examine the conceptual linkages between the issue of land rights for women, with household food security on the one hand and gender equality on the other. After a brief analysis of shifts in both international and national policy discourse and practice in terms of control over land as vital for food security, it seeks to analyse the implications of this for gender relations. The paper argues that in a context of diversified rural livelihoods, the contribution of agricultural production to household subsistence has been declining. This trend has been reinforced by a decline in public investment, stagnant growth and fluctuating prices for agricultural products. Men have been able to access the better paid, non-farm jobs, while leaving women behind to manage agricultural production. The renewed link between production and food security in agricultural policy has however meant allowing men not to have responsibility for household food security. While a right to land for women is a positive development, it appears also to be leading to an enhancement of work burdens, without much change in terms of status or decision-making authority.

Threatening others: Nicaraguans and the formation of national identities in Costa Rica

Winner of 2002 Costa Rican National Monograph Award During the last two decades, a decline in public investment has undermined some of the national values and institutions of Costa Rica. The resulting sense of dislocation and loss is usually projected onto Nicaraguan immigrants. Threatening Others: Nicaraguans and the Formation of National Identities in Costa Rica explores the representation of the Nicaraguan other in the Costa Rican imagery. It also seeks to address more generally why the sense of national belonging constitutes a crucial identification in contemporary societies. Interdisciplinary and based on extensive fieldwork, it looks critically at the exceptionalism that Costa Ricans take for granted and view as a part of their national identity. Carlos Sandoval-Garcia argues that Nicaraguan immigrants, once perceived as a communist threat, are now victims of an invigorated, racialized politics in which the Nicaraguan nationality has become an offense in itself. Threatening Others is a deeply searching book that will interest scholars and students in Latin American studies and politics, cultural studies, and ethnic studies.

Need for Banks to Know the New Trends for Agricultural Finance

Agricultural growth decelerated during 1990. Agricultural performances witnessed a dip in the 1990s partly on account of subdued public investment in agriculture and an inadequate diversification. The decline in public investment was only partially compensated by the rise in private investment. Real private investment in agriculture did gave rise significantly, but in the face of declining real public investment in agriculture, overall real capital formation in this sector has been low in recent years.

Fiscal policy and monetary integration in Europe

A popular view among economists, policymakers, and the media, is that the Maastricht Treaty and then Stability and Growth Pact have significantly impaired the ability of EU governments to conduct a stabilizing fiscal policy and to provide an adequate level of public infrastructure. In this paper, we investigate this view by estimating fiscal rules for the discretionary budget deficit over the period 1980-2002, using data on EMU countries and control groups of non-EMU EU countries and other non-EU OECD countries. We do not find much support for this view. In fact, we find that discretionary fiscal policy in EMU countries has become more countercyclical over time, following what appears to be a trend that affects other industrialized countries as well. Similarly, we find that the decline in public investment experienced over the last decade by EMU countries is part of a world-wide trend that started well before the Maastricht Treaty was signed.

Trends in British public investment

AbstractBritish public investment has declined sharply both as a share of GDP and as a share of government spending since the 1970s. Only part of this decline is explained by privatisation, which transferred some public investment to the private sector. More important was the very large and permanent reduction in public house‐building between the mid‐1970s and the early 1980s. Between the late 1980s and the early 1990s, the rate of public investment recovered somewhat, but after that time it declined again, reaching a record low in 1999. The most recent decline in public investment has affected a range of central government programmes, and it has not been significantly offset by investment under the Private Finance Initiative. The government now plans to increase investment spending, although levels look set to remain low by historical standards for some time to come.

Factor Mobility, Government Debt and the Decline in Public Investment

This paper tries to explain the declining level of public investment in OECD countries. The theoretical framework hints to the relevance of a number of demand and supply factors - ranging from the yield of public investment to institutions like the EU deficit limits. The econometric results indicate that the decline is largely due to two developments: First to the pile-up of public debt since the 70s which in the 90s severely restricted ability to finance new investment. Second to the increasing mobility of factors that has added to the financing difficulties. In contrast to that neither the privatisation process nor EU deficit restrictions of the Maastricht Treaty can explain the decline.

Public Investment and Private Sector Performance – International Evidence

This paper analyzes the effects of public investment on aggregate private sector performance for a group of twelve OECD economies. the empirical results are based on impulse response function analysis associated with country-specific VAR/ECM models. Estimation results suggest that for most countries, public investment crowds in private investment while it does not substantially affect employment. More importantly, the effects of public investment on private output are positive for all the countries. Germany, Japan, Sweden, UK, and US are the countries with the highest long-term elasticities of output with respect to public investment. Therefore, there seems to be a strong correlation across countries between the elasticity of output with respect to public investment and the levels of economic achievement. Finally, empirical results suggest that public investment affects labor productivity growth positively for all countries. Accordingly, the decline in public investment is a legitimate candidate to explain the slowdown of labor productivity growth in these countries.