Investment In Machinery Research Articles

A comparative study on industrial spillover effects among Korea, China, the USA, Germany and Japan

PurposeStarting from industry 4.0 in Germany and followed by the New Strategy for American Innovation in the USA and the smartization strategy in Japan, developed countries are pushing nation-wide innovation strategies. Similarly, China is pursuing the Made in China 2025, and Korea announced the Manufacturing Industry Innovation 3.0 strategy. However, few researchers have identified the industrial structure that establishes the foundation of the 4th Industrial Revolution or have derived strengths and weaknesses to provide implications on policy formulation through quantitative comparison with developed countries. Therefore, the purpose of this paper is to analyze the spillover effect of the information and communication technology (ICT) industry (the foundation of the 4th Industrial Revolution) and machinery·equipment industry (the foundation of smart manufacturing through convergence with ICT industry).Design/methodology/approachThis study examines the industrial spillover effects of the ICT industry and machinery·equipment industry in the USA, Germany, Japan, China and Korea by using the World Input–Output Table from 2000 to 2014.FindingsThe results showed that backward linkage effect of the ICT Industry are high in the order of Korea≑China>Japan>the USA≑Germany, and forward linkage effect of the ICT industry are high in the order of Japan ≑> the USA≑Korea ≑> China ≑> Germany. Backward linkage effects of the machinery·equipment industry are high in the order of China>Japan≑Korea>the USA>Germany, and forward linkage effects of the machinery·equipment industry are high in the order of China>Korea>Germany≑Japan≑the USA.Practical implicationsChina and Korea encourage active government investment in ICT and machinery·equipment industries, especially the intentional convergence between ICT and machinery·equipment industries is expected be generate higher synergy. The “innovation in manufacturing” strategy in the USA that utilizes its strength in ICT services seems appropriate, whereas Germany needs to revitalize the ICT industry to strengthen its manufacturing industry. Japan’s strategy is to focus its ICT capabilities on robot sector. While the scope of innovation is limited, its synergy is worth expecting.Originality/valueThis study attempted to provide a theoretical approach to the determination of national policy strategies and provide practical implications for response to the impacts of the 4th Industrial Revolution, by comparing the inducement effects of ICT and machinery·equipment industries between major countries.

Fabrication laboratories

PurposeThe purpose of this paper is to analyze the current state of fabrication laboratories (Fab Lab), an international network of digital laboratories, which provides new technological tools for digital manufacturing that can be used from individual users, to small businesses and schools. The aim is to understand similarities and differences of skills, technologies used and customers served among the main European laboratories (Italy, France, Germany, the Netherlands and Spain) and the American ones.Design/methodology/approachData from European and American Fab Labs were collected using a questionnaire survey performed on a total sample ofn=493 Fab Labs. The administration of the survey took place through e-mail; 73 Fab Labs participated to the survey, reaching a total response rate of 14.81 percent.FindingsThe results show that Italian laboratories are characterized by ample space available, but limited capacity for investment in machinery and technology. European Fab Labs are similar to the Italian Fab Labs, while the American ones are more heterogeneous in size. However, a fact that emerges clearly from the results is how American Fab Labs are more important realities than European ones in terms of turnover and investments. They are more similar to businesses with an independent financial support.Originality/valueThe novelty of the study resides in the issue considered and the experimental techniques used. Some qualitative case studies have been developed in the field, but no previous quantitative analyses have been developed on a large sample of Fab Labs, developing comparisons between European and American realities of these digital laboratories.

Agricultural Mechanization as an Expansion Factor of Cropland in Benin: The Case of Tractors

We propose in this paper a methodology based on the vector error correction (VCE) model. This modeling approach makes it possible to use a large database to model the impact of agricultural mechanization on cropland in Benin. The results of the VEC model estimates confirm a positive relationship between agricultural mechanization and the areas planted of paddy rice, millet and yams. Moreover, the findings suggest that agricultural mechanization is still far to boost the land uses of cotton, maize and cassava, despite the importance of cotton in the Beninese economy on the one hand, and the key roles of maize and cassava in diet in Benin, on the other hand. Agricultural mechanization is far from being a reality in Benin's agricultural sector to the extent that public agricultural investments are below the Maputo agreements (Note 1). An effective agricultural mechanization must opt for cereals whose investments in agricultural machinery are less expensive compared to cotton. This strategy of agricultural mechanization makes it possible to better ensure food security, unlike the intensive cotton production, whose terms of trade are always unfavorable and dependent on subsidies from the North.

MARKETING STRATEGY FOR SMALL AND MEDIUM ENTERPRISE (SMES) OF COCONUT FURNITURE IN THE REGENCY OF TOMOHON MINAHASA, INDONESIA

North Sulawesi, one of the provinces in northern part of Indonesia has an abundant coconut plantation which covers the area of more than 2.5 hundred thousand hectares. The coconut timber of this region has a harder and high density and is considered as the best of its kind throughout Indonesia. The coconut lumber has been widely used as building construction components and furniture. The latter has attracted the small and medium enterprise in Tomohon Minahasa to produce a high quality furniture. With the help of a foreign investment in machinery, this enterprise has been able to compete in the domestic market. However, recently it has faced a growing and intense competition from other alternatives that has significantly reduced the marketability and competitiveness of the coconut furniture. The research focuses on creating marketing strategy to this slow growth enterprise that will enable it to revive and recapture the lost markets and develop new ones. The research methods employs a combination of observation, interview and questionnaire, documentation and analyzed using IFE and EFE Matrices and Space Matrix . The finding shows that the enterprise is in Quadrant 4 which requires a competitive strategy. Product differentiation, backward and forward integration, networking and broadening marketing scale are among viable and feasible alternatives for this enterprise to not only survive but gain profitable end.

In Search of Tax Policy to Boost Investment in Pakistan

In the November/December 2017 issue of the Asia-Pacific Tax Bulletin, the author discussed the search for tax policy to improve taxpayer compliance in Pakistan. In this article, the author continues his enquiry, examining tax policy to boost investment in Pakistan. He evaluates the tax credit regimes in the Income Tax Ordinance 2001 available to companies, which are intended to encourage investment in plant and machinery, listing on a registered stock exchange and establishing industrial undertakings. The article explains the practical difficulties that have been encountered by companies as a result of contradictory statutory provisions and when excess tax credits arise, and discusses how they are overcome.

Factors associated with profitability in pasture-based systems of milk production

The global dairy industry needs to reappraise the systems of milk production that are operated at farm level with specific focus on enhancing technical efficiency and competitiveness of the sector. The objective of this study was to quantify the factors associated with costs of production, profitability, and pasture use, and the effects of pasture use on financial performance of dairy farms using an internationally recognized representative database over an 8-yr period (2008 to 2015) on pasture-based systems. To examine the associated effects of several farm system and management variables on specific performance measures, a series of multiple regression models were developed. Factors evaluated included pasture use [kg of dry matter/ha and stocking rate (livestock units/ha)], grazing season length, breeding season length, milk recording, herd size, dairy farm size (ha), farmer age, discussion group membership, proportion of purchased feed, protein %, fat %, kg of milk fat and protein per cow, kg of milk fat and protein per hectare, and capital investment in machinery, livestock, and buildings. Multiple regression analysis demonstrated costs of production per hectare differed by year, geographical location, soil type, level of pasture use, proportion of purchased feed, protein %, kg of fat and protein per cow, dairy farm size, breeding season length, and capital investment in machinery, livestock, and buildings per cow. The results of the analysis revealed that farm net profit per hectare was associated with pasture use per hectare, year, location, soil type, grazing season length, proportion of purchased feed, protein %, kg of fat and protein per cow, dairy farm size, and capital investment in machinery and buildings per cow. Pasture use per hectare was associated with year, location, soil type, stocking rate, dairy farm size, fat %, protein %, kg of fat and protein per cow, farmer age, capital investment in machinery and buildings per cow, breeding season length, and discussion group membership. On average, over the 8-yr period, each additional tonne of pasture dry matter used increased gross profit by €278 and net profit by €173 on dairy farms. Conversely, a 10% increase in the proportion of purchased feed in the diet resulted in a reduction in net profit per hectare by €97 and net profit by €207 per tonne of fat and protein. Results from this study, albeit in a quota limited environment, have demonstrated that the profitability of pasture-based dairy systems is significantly associated with the proportion of pasture used at the farm level, being cognizant of the levels of purchased feed.

Determinantes de la Innovación en el Sector Productivo de Panamá

There is consensus on the positive relationship between research and development, innovation and productivity, however there are other variables related to the topic that are important to identify. At the national level, studies on innovation are scarce, so it is necessary to go deeper into it. This research focused on identifying the factors that determine innovation in the productive sectors of Panama. An extensive bibliography on innovation in the productive sectors was reviewed at global and national levels. The food industry database of the Agro-industrial Production and Research Center was analyzed and case studies were carried out in national companies. The study found that the main factors that drive innovation in companies are: workforce skills, investment in R & D, market orientation, use of ICTs, links between public and private players, company size, networking, university-government-business interaction, and innovation subsidies. In the case studies conducted in Panama, the key factors that explain innovation in agro-industries are the following: investment in machinery and equipment links with supplier companies, customers and competitors, and demand or market orientation.Keywords: Innovation, research and development, productive sector

ОСНОВНЫЕ ЧЕРТЫ АГРАРНЫХ ТРАНСФОРМАЦИЙ В БЫВШЕЙ ГДР

The article considers the agrarian transformations (primarily privatization and structural adaptation to the domestic and international markets) in the former GDR that are often presented as a success story due to the growth in agricultural productivity and competitiveness of new types of agricultural en-terprises. First, the author identifies the main tasks of these transformations: (1) privatization of the “socialist property” and its distribution between (a) those who contributed capital and land to the agricultural enter-prise when it was established, and (b) its employees at the moment of restructuring; (2) adaptation to new market conditions. Both tasks were extremely difficult and challenging for they required large investments in better breeds and machinery, and a significant reduction of agricultural workforce. Second, the author considers the legislative basis for privatization and the real practices of the reorganization of the former agricultural enterprises (proposals for the distribution of the assets, land restitution as prior to compen-sation, the successor large-scale enterprises forced land leasing contracts, manipulations with the balance sheets to obtain hidden reserves necessary for survival by underestimation of the existing assets, etc.). The author believes that the Kohl government did not foresee that privatization would be so complicated, and made many mistakes while striving to keep agricultural production in the new countries, especially to restrain the growth of unemployment. Therefore, the contemporary research of the agricultural economy is very critical of the regulations and frameworks set by the German government that is blamed for being responsible for many serious development constraints (short-term leasing contracts, paying off old debts, the lack of state subsidies for large enterprises, etc.). The final section of the article reveals the meaning of the land property in the agrarian transformations in the GDR. The author relies on the statistical data for more than two decades, monitoring data on the still ongoing transition and his own studies of agri-cultural enterprises in different regions (1992, 1997, 2002 and 2016).

Sources of long run economic growth in Russia before and after the global financial crisis

Abstract Although productivity decline in the global economy was observed before 2008, the global financial crisis of 2008 stimulated study of its source. In this context, recent literature mentions inefficient investments in machinery, human capital, and organizational processes. This can include skill mismatch and the lack of technology diffusion from advanced to emerging industries and firms. To what extent is this global view helpful in understanding recent productivity decline in the Russian economy? The present study reports that at least some of these sources can be observed in Russia as well. Using conventional industry growth accounting, it compares pre- and post-crisis sources of growth for the Russian economy. Specifically, it presents aggregate labor productivity growth as the sum of capital intensity and total factor productivity (TFP) growth in industries, and the contribution of labor reallocation between industries. It shows that the stagnation of 2008–2014 is more the result of the TFP decline and the deterioration of the allocation of labor than the lack of capital input. Moreover, the TFP decline started in Russia a few years before the crisis, as it did in major global economies, such as the United States, OECD countries, China, and Brazil. At the same time, relatively stable capital intensity made the Russian pattern to some degree similar to resource abundant Australia and Canada. Furthermore, the contribution of information and communications technology capital to labor productivity growth in Russia declined after 2008, which could have also hampered technology diffusion. Finally, the structure of the flow of capital services in Russia changed after 2008. Before the crisis, the contribution of machinery and equipment dominated, while after the crisis, construction provided the lion's share of capital input.

Are countries ready for the new meso revolution? Testing the waters for new industrial change in Korea

Capitalism needs momentum and market for growth. Even without subscribing to a specific academic school, capitalism has felt the need for theories or mechanisms to overcome crises in the past. This research tries to shed light on the recent momentum of industry 4.0 with an expanded scope that includes this wave in a series of meso revolutions brought about by the spread of capitalism. After reviewing a lineage of theories that could shape meso revolutions in economic history, this research used Bank of Korea's data, including total capital efficiency and machinery investment efficiency, to check the recent status of the private sector of Korea. An institutional review of the preliminary budget analysis adopted in Korea was then conducted to draw some implications for the country's preparedness toward the so-called industry 4.0 with potential implications for other countries.

The impact of long-term secured loans on exports at the firm-level: The case of a developing country

ABSTRACTWe analyze the role of the accumulation of long-term secured loans on the participation of firms in exporting activities. Internal sources of finance, such as cash balance and its equivalent as well as operating cash flow, may alleviate concerns on liquidity shocks and finance shorter-term variable costs but long-term secured loans are likely to be required to finance fixed costs related to investments in plant, machinery and other fixed assets that complement exporting activities. Exporting activities may involve hysteresis such that the likelihood of a firm to participate in exporting activities is influenced by the accumulation of long-term secured loans in the period prior to the export transactions. Even though the availability of internal sources of finance and the capital structure of a firm has greater economic significance, we observe that lagged long-term secured loans influences participation in exporting activities. Furthermore, we analyze the impact of one-year lagged long-term secured loans on the participation of firms in exporting activities based on the financial characteristics at the industry-level. This relationship holds for firms within industries with higher levels of long-term secured loans, higher levels of finance leverage, higher levels of asset tangibility and lower levels of total assets.

Sources of Long Run Economic Growth of the Russian Economy Before and after the Global Financial Crisis

Although a productivity slowdown of the global economy was observed before 2008, it was the 2008 crisis that stimulated studies on its origins. Recent literature suggests inefficient investments in machinery, human capital and organizational processes. This includes skill mismatches and a lack of technology diffusion from advanced to laggard industries and firms. To what extent is this global view helpful in understanding recent productivity slowdown of the Russian economy? The present study reports that at least some of these origins can be observed in Russia. Using conventional industry growth accounting, it compares the pre- and post-crisis sources of growth in the Russian economy. Specifically, it represents aggregate labour productivity growth as the sum of capital deepening and total factor productivity (TFP) growth in industries, and the contribution of labour reallocation between industries. It shows that the stagnation of 2008-2014 is more an outcome of the TFP slowdown and a deterioration of the allocation of labour rather than a lack of capital inputs. The TFP slowdown started in Russia a few years before the crisis, as in other major global economies, such as OECD countries, China and Brazil. Russia demonstrated relatively stable capital deepening makes the Russian pattern similar to resource abundant Australia and Canada. Next, the contribution of information and communication capital to labour productivity growth in Russia after 2008 declined, which could have hampered technology diffusion. Finally the structure of the flow of capital services in Russia changed after 2008. Before the crisis the contribution of machinery and equipment dominated, while after the crisis construction provided the most capital inputs.

Changing age structure and input substitutability in the Thai agricultural sector

The rapidly aging society and agricultural abandonment by young people in Thailand have changed the age structure of Thai agricultural labor, and influenced the potential for agricultural production. Thus, it is important to study the feasibility of other inputs as a substitute for labor. This paper estimated the degree of elasticity substitution of inputs, particularly young labor, older labor, and physical capital. The elasticity of input substitution was estimated using a nested constant elasticity of substitution (CES) production function and nonlinear regression analysis. Research data were obtained from the annual secondary data of government sources from 1990 to 2013. The findings indicated that the input substitutability of young and older labor was low. However, capital and labor could substitute for each other. Moreover, capital better substituted for young labor than older labor. The results suggested that both the public and private sectors should encourage young people to engage in the agricultural sector, and support investment in farm machinery as a labor substitute.

Abstract 4226: Challenges to breast cancer early detection in the developing, high income country of Trinidad and Tobago

Abstract Trinidad and Tobago (T&T) has one of the highest breast cancer (BC) mortality rates in the Americas. For the period 1995-2007, 5-year BC survival rates in T&T were approximately 30%. One possible explanation for T&T’s low BC survival rates could be late presentation and detection. Currently, opportunistic BC screening programs exist in the public and private sectors and some advocate for an organized national BC screening program. However, the World Health Organization (WHO) only recommends the implementation of organized BC screening in high resource settings. Thus, the purpose of this study was to conduct a situational analysis of breast cancer early detection services in the public and private sector to identify gaps in service and determine if a national organized screening program is warranted. The quality, availability, affordability and accessibility of BC screening services in the public and private sector was assessed with an online survey using the Cancer Control WHO Guide for Effective Programs framework. The inter-rater reliability and validity was assessed during a pilot phase at two public institutions. All public and private facilities and NGOs with BC early detection services were invited to participate in the survey. A focus group with key radiologists in T&T was held to review the results of the study, identify unaddressed challenges and make recommendations for improvement. Significant challenges exist in service availability and access, physical and human resources, program monitoring and evaluation, quality control mechanisms, follow-up diagnostics and care. Specifically, services are largely monopolized by the private sector at a cost to nationals. Public services which are free, are restricted to major hospitals where wait times extend to 3-6 months, thus contributing to a disparity in access. Both sectors cite a lack of trained staff such as specialist breast radiographers and radiologists. There is also a lack of preventative maintenance and investment in new machinery. No quality control guidelines or manuals for machinery use exist in the public sector. Across both sectors, 70% of institutions have no program evaluation. Other systemic problems such as long wait times for pathology reports also undermine the efficacy of current BC early detection efforts. An organized national breast cancer screening program is not recommended for T&T at this time. More pressing concerns across the cancer care continuum need to be first addressed particularly in strengthening human and physical resource capacity and service quality for detection, diagnosis, and follow-up care. Also, research into factors such as time-to-treat, frequency of late stage presentation and misdiagnosis warrant further attention if T&T is to improve its BC survival rate. Note: This abstract was not presented at the meeting. Citation Format: Kimberly Badal, Fidel Rampersad, Hamish Mohammed, Murrie Moosoodeen, Siva Konduru, Nalini Kokaram Maharaj, Adaila Russel, Melissa Nathan, Marisa Nimrod, Wayne A. Warner, Rajini Haraksingh, Adetunji Toriola. Challenges to breast cancer early detection in the developing, high income country of Trinidad and Tobago [abstract]. In: Proceedings of the American Association for Cancer Research Annual Meeting 2017; 2017 Apr 1-5; Washington, DC. Philadelphia (PA): AACR; Cancer Res 2017;77(13 Suppl):Abstract nr 4226. doi:10.1158/1538-7445.AM2017-4226

Growth rate correlates negatively with protein turnover in Arabidopsis accessions.

Previous studies with Arabidopsis accessions revealed that biomass correlates negatively to dusk starch content and total protein, and positively to the maximum activities of enzymes in photosynthesis. We hypothesized that large accessions have lower ribosome abundance and lower rates of protein synthesis, and that this is compensated by lower rates of protein degradation. This would increase growth efficiency and allow more investment in photosynthetic machinery. We analysed ribosome abundance and polysome loading in 19 accessions, modelled the rates of protein synthesis and compared them with the observed rate of growth. Large accessions contained less ribosomes than small accessions, due mainly to cytosolic ribosome abundance falling at night in large accessions. The modelled rates of protein synthesis resembled those required for growth in large accessions, but were up to 30% in excess in small accessions. We then employed 13 CO2 pulse-chase labelling to measure the rates of protein synthesis and degradation in 13 accessions. Small accessions had a slightly higher rate of protein synthesis and much higher rates of protein degradation than large accessions. Protein turnover was negligible in large accessions but equivalent to up to 30% of synthesised proteinday-1 in small accessions. We discuss to what extent the decrease in growth in small accessions can be quantitatively explained by known costs of protein turnover and what factors may lead to the altered diurnal dynamics and increase of ribosome abundance in small accessions, and propose that there is a trade-off between protein turnover and maximisation of growth rate.

Industrial Development: Assessment of Economic Performance and Competitiveness, Johannesburg in 2015

Following the financial crisis in 2008 and the drop in commodity prices, the performance of firms in the manufacturing industry continues to worsen. The data released by Statistics South Africa in 2016 alludes to poor performance by firms and the manufacturing sector’s continual decline to contribution to economic growth. This decline has been coupled with increasing unemployment, inequality and poverty levels. Notwithstanding this, one of the key objectives of South Africa’s Department of Trade and Industry’s Industrial Policy Action Plan is to stimulate greater economic growth and develop labour-absorbing sectors, particularly in the manufacturing sector. The sustainability of the manufacturing sector is key, however, there is limited information on the factors that drive it. Recognising and appreciating the nature of manufacturing and the challenges faced by firms can assist policymakers to devise interventions which can stimulate inclusive growth and job-creation in Johannesburg. The Centre for Competition, Regulation, and Economic Development (CCRED) at the University of Johannesburg undertook a firm-level survey to understand the nature of economic activity in Johannesburg’s 26 industrial nodes. Based on this survey, this paper analyses responses on economic performance, competitiveness and the challenges faced submitted by over 300 firms. In-depth interviews with 45 firms were also conducted to deepen the insights from the survey. Changes in growth; exporting patterns; investments and level of skills were assessed as an indication of economic performance and competitiveness. Despite the consensus that economic performance is weak, this study offers a different perspective. A significant proportion of firms exhibited growth in the past 3 years due to their sector grouping, access to the export market and investment in machinery and equipment, among other factors. The paper offers recommendations to address ways to stimulate economic performance and competitiveness in Johannesburg.

ITTIntensive Machinery and Equipment, Organizational Change and Productivity Growth

The complementarity between investment in machinery and equipment (M&E) with IT and organizational changes for firm productivity growth is studied in this paper. In order to investigate whether this complementarity is a general phenomenon or rather relates to specific sectors, it is necessary to address how this complementarity varies across sectors. The main result is that firms that simultaneously invested in M&E with IT and made organizational changes prior to the financial crisis of 2008 outperformed their less innovative counterparts in the years following the onset of the financial crisis. This suggests that firms should implement changes simultaneously, not one at a time, to obtain higher productivity growth rates. At the sectoral level, this result holds for Manufacturing and Wholesale and Retail trade. Outside these sectors, we are not able to find any additional growth effect for firms that simultaneously invested in M&E with IT and made organizational changes.

EU accession and foreign-owned firms in Bulgaria

ABSTRACTBulgaria signed the European Union accession treaty in 2005. Accession caused an increase in the volume of inward foreign direct investment flows (IFDI). We analyse World Bank BEEPS firm-level data for 2007 to understand the characteristics and performance of foreign firms in Bulgaria. Regression analysis reveals that foreign firms are larger, have lower capital-to-labour ratios, are more likely to export and are more likely to locate in Sofia. However, foreign firms have had limited success in Bulgaria. They do not exhibit higher sales growth and, in manufacturing, carried out lower capital investment in machinery than domestic firms. The numbers of visits from tax officials is the same for domestic and foreign firms in manufacturing, and lower for foreign firms in the service sector. However, firms with higher exports-to-sales ratios and higher absolute sales were subjected to a higher number of visits from tax officials. These findings suggest that a range of institutional challenges remain for foreign firms in Bulgaria.

Investments in Agricultural Machinery and its Efficiency in Ukraine

One of the major conditions of effective agriculture production is sufficient farm mechanization. However, the unstable economic situation in Ukraine, combined with bureaucratic problems, an unstable currency exchange rate, and sharply changed trade routes (which has caused major losses to a number of farms and traders working with the Custom Union) created significant obstacles for investing in machinery in Ukraine. It is especially topical for small and medium farms that usually function in poor economic conditions without any adequate access to the credit market. Consequently, Ukrainian agriculture producers often have an inadequate mechanization rate. As a result, the productivity of Ukrainian farms is significantly lower as compared to other countries that have similar natural conditions in terms of temperatures, precipitation and quality of agricultural lands.A no less important problem is the lack of awareness of small and medium farms, which may not realize the effect that investment has in agriculture machinery. Thus, in order to provide specific numbers for potential investors and prove the efficiency of this fund placement, an expected direct economic effect from machinery investment (as an increased profit from higher yield) was estimated. The first step was to define those types of agricultural machinery that have significant impact on the yield and productivity levels for each of the most important crop types: grain, oil crops, vegetables, fruits, etc. Then, an impact of additional investment in various machinery means on crops yield was estimated. Finally, based on fixed prices and a discount rate, an expected additional profit generated by newly purchased machinery on an average farm was estimated. The model proved especially high profitability of investment in such machinery as ploughs, fertilizers spreaders, harvesters, tractors, and machines for irrigation – most of them are paid off (on a land parcel with area around 2000 ha) in three years or less.

Does public investment crowd-out private investment in India

PurposeThe purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India.Design/methodology/approachThe autoregressive distributed lag (ARDL) bounds testing approach is used to estimate the long run relationship between public and private investment using annual data from 1971-1972 to 2009-2010.FindingsBased on the empirical findings, it is observed that aggregate public investment has a positive effect on private investment both in the long run and the short run. In contrast to the findings of previous studies, no significant impact of public infrastructure investment on private investments is found in the long run, while non-infrastructure investment has a positive impact on private investment in the short run. Among the various categories of infrastructure sector, a positive and significant impact in the case of electricity, gas and water supply is observed. Similarly, the result indicates that public investment in machinery and equipment and construction have substantially influenced the private sector machinery and equipment in the long run and the short run. In the case of the role of macroeconomic uncertainty, the results find a negative and significant impact on private investment and the impact is higher in the short run than in the long run.Originality/valueThe present study extends the literature in three important ways: First, the study attempts to capture heterogeneity of public investment as well as disaggregate effects of two different categories of public infrastructure on private investment. The extent to which two different types of public assets impact the private investment in machinery and equipment investment is also examined. Second, ARDL model is used to examine the long-run relationship between public and private investment. Third, the study incorporates macroeconomic uncertainty into the empirical analysis to examine the role of macroeconomic volatility in determining private investment decision.