Regional Public Investment Research Articles

TÜRKİYE’DE YATIRIM TEŞVİKLERİNİN BÖLGESEL EKONOMİK BÜYÜME ÜZERİNDEKİ ETKİSİ: AMPİRİK BİR ANALİZ

Regional inequalities continue to be a major barrier preventing economic growth and development, especially for developing countries. Governments’ efforts to use public investment incentives in eliminating regional inequalities are among the most frequently implemented policies. From this point of view, this paper examines the impact of regional public investment incentives on regional economic growth in 26 development regions of Turkey over the 2004-2018 period using panel data analysis. The results of this study prove that total regional investment incentives have a positive impact on the economic growth of the regions in Turkey. The results also indicate that the investment incentives for the agricultural sector positively affect the agricultural sector, and investment incentives for the industrial sector affect the industrial sector positively, and the investment incentives for the services sector positively affect the services sector in Turkey. On the other hand, it has been statistically proved that the effect of investment incentives for the agricultural sector, which has the lowest share in investment incentives, is more effective than other types of incentives. Therefore, one of the most important results of this study is that agricultural investment incentives are among the main dynamics of agricultural development in Turkey, and that it is the most effective incentive type among investment incentives.

Why the financial aid of the EU's regional policy does not impact on the public investment level? The case of the Spanish regions

Given that an expansive impact of the European Regional Development Fund (ERDF) aid on public investment is expected, two models have been estimated to determine, respectively, the size of this impact and the relationship between the own financing of regional public investment and the external financing received from ERDF in Spanish regions. Evidence has been obtained that the impact of transfers from the ERDF on public investment is almost nil. In addition, for each euro that the Spanish regions received from the ERDF, own funds for public investment allocated by regional governments have been reduced 23 cents, showing an important relation of substitution between the two sources of financing. Both models include data between 1994 and 2014 and their estimation has used traditional methods and methods based on the cointegration of variables with a panel structure, such as FMOLS and DOLS. The main results obtained with the two methodologies they are quite close, confirming the initial hypothesis: in the presence of weak donor restrictions, the political process in governments receiving ERDF transfers determine revealed preferences about public investment, neutralizing conditions established by the donor. This study also unequivocally demonstrates the presence of simultaneous causality between investment aid received from the ERDF and regional public investment and between said aid and the own resources that regional governments dedicate to financing public investment. These findings confirm the existence of a bias that seriously affects the effectiveness of the European Union's regional policy.

Policy in the Pipeline: Identifying Regional Public Investment Priorities Using a Natural Experiment

We identify regional public investment priorities by studying the development of the water pipe system in the largest district in Poland. For this purpose, we take advantage of a major administrative re-form, implemented on 1 January 1999, which substantially changed the structure of Polish local government and reduced the number of top-tier administrative regions from 49 to 16. We treat the reform as a natural experiment, and apply the difference-in-differences approach to study developments along the boundary of the new Mazovian voivodeship. We find strong and positive implications for the development of the water pipe system in municipalities within the Mazovian voivodeship compared with those just outside its boundaries. The overall post-reform difference in the length of the total water pipe network is 25% and the difference in the per-capita length of the network is 30%. Local public investment priorities at the voivodeship level, potentially related to effective use of EU funds, are the most likely determinants of these differences.

Efficiency of Regional Public Investment: An NPV-Based Spatial Econometric Approach

This paper develops a new methodology of spatial econometric modelling for regional public investment in local economies. The approach, based on the financial concept of net present value of cash flows, can be applied in the analysis of regional public investment with long-term financial inputs and outputs. With local public revenues related to spending in the model, one can observe economies of scale of investment with possible saturation effects and a marginal investment multiplier, explaining the extent to which public investment costs translate into public revenues. The main advantage of the proposed model is to behave counter-cyclically due to accumulation over the periods and to cover multi-period investments as well as postponed effects. This paper gives an example of public investment efficiency in Polish NUTS-5 municipalities regions.

Politics and Investment: Examining the Territorial Allocation of Public Investment in Greece

Rodríguez-Pose A., Psycharis Y. and Tselios V. Politics and investment: examining the territorial allocation of public investment in Greece, Regional Studies. This paper discusses how electoral politics shapes the regional allocation of public investment expenditures per capita in Greece. Using regional public investment data for ten political periods (1975–2009), combined with electoral data by constituency, a model is proposed that captures the influence of politics on the regional distribution of public investment expenditures. The results of the analysis point to a strong relationship between electoral results and regional public investment spending. Greek governing parties have tended to reward those constituencies returning them to office. Moreover, an increase in both the absolute and the relative electoral returns of the governing party in a region has traditionally been followed by greater public investment per capita in that region. Regions where the governing party (whether Liberal or Socialist) has held a monopoly of seats have been the greatest beneficiaries of this type of pork-barrel politics.

Multi-sectoral interdependencies of regional public infrastructure investments

Public investment decision-making processes involve multiple and interrelated sectoral and regional policy objectives and budget constraints. This paper presents a dynamic spatio-economic model that considers multi-sectoral investment interdependencies using data at the prefecture level in Greece. The expenditure allocation dynamics of most types of regional public investment are found to be competitive with each other. This outcome is attributed to the lack of policy coordination, technological and budget constraints, geographical factors, and equity and political considerations. The investment interrelationships may have a significant effect on future state funding needs and the strategic assessment of infrastructure development at the country level.

Public infrastructure investments and regional specialization: empirical evidence from Greece

AbstractThe paper investigates the determinants of regional specialization for six broad sectors of economic activity in Greece, focusing on the effect of various types of public infrastructure investment. A system‐wide model of panel regression equations is employed to recognize the significance of spatially fixed effects and that the covariates of specialization may vary with each sector. The role of market access on the specialization of manufacturing and main service activities is found to be conflicting with that of regional public investment, especially with regard to road expenditure. The results signify the potential of policy‐makers to affect specialization patterns through reallocation of regional investment shares.

Between equity, efficiency and redistribution: An analysis of revealed allocation criteria of regional public investment in Greece

As the debt crisis in Europe continues to unfold, renewed attention is placed increasingly on public (and private) investment as a vehicle for reigniting growth and counterbalancing the austerity effects of fiscal consolidation policies. Nowhere is this more urgent, or salient, than in Greece. However, there is remarkably little research, at least in that country, examining the criteria under which public investment is allocated across functional categories and across space. This article offers an extensive analysis of the spatial and functional allocation of public investment in Greece over a 33-year period and for various political-economic sub-periods. It examines the prevalence of criteria relating to redistribution, efficiency and equity; the temporal stability and functional complementarity of the observed allocations; and the extent of specialisation, concentration and clustering. Our results offer little evidence of regional or functional targeting, the exploitation of synergies and scale effects (efficiency), or the pursuit of objectives related to equity or redistribution. This raises serious questions about the efficacy of past public investment allocations in Greece and, with the expected increase in funding emanating from the EU, highlights the need for (re)defining the priorities and criteria for the spatial and functional allocation of public investments in the future.

Public Investment As a Fiscal Stimulus: Evidence from Japan's Regional Spending During the 1990's

How effective was public investment in stimulating the Japanese economy during the economic stagnation of the 1990s? Using a dataset of regional public investment spending, we find that investment multipliers were higher than for public consumption, although they were relatively low and declining over time. The paper also finds that the effectiveness of economic infrastructure investment, implemented mainly by the central government, is lower than that of social investment mostly undertaken by local governments. These results suggest that while public investment may yield higher output effects than other spending, its effectiveness depends upon its composition, the level of government implementation, and supply side factors.

Does fiscal redistribution discourage local public investment?

AbstractThis paper studies the determinants of regional (oblast‐level) public investment in transitional Russia, focusing on the effects of federal fiscal redistribution. A model of local government expenditure in the presence of regional asymmetries shows that revenue redistribution from wealthy to poor regions discourages local public investment. Random‐ and fixed‐effects estimation of regional panel data for 1994–97 supports the existence of a disincentive effect from fiscal redistribution on regional public investment, which varies according to a region's federal status and wealth: non‐republics have a lower propensity to invest out of transfers than out of own income, as do regions with above‐median per capita income. Republics reduce public investment more than current spending in response to higher federal taxation. Russia's ‘asymmetrical federalism’ thus creates different fiscal incentives for different types of regions.

Capital grants and regional public investment in Spain: fungibility of aid or crowding-in effect?

The aim of capital grants to subcentral governments is to increase their investment. However, recipients may try to allocate additional resources to cut saving or deficit, generating a crowding-out effect on self-financed investment. Using data from the Spanish Autonomous Communities during the period 1984 to 1999, the effect of capital transfers on regional public investment, saving and deficit are estimated. Econometric results demonstrate that capital grants have no relevance when explaining the dynamics of saving. However, in deficit regressions they are shown to be both significant and negative. Both results lead us to a partial long-run crowding-out effect of grants on self-financed investment.

Population stabilization and national spatial policy of public investment: the Japanese experience.

"This paper presents a new method that can be used to reveal the policy objectives with which actual public investment decisions are consistent. Japanese regional investment expenditures from 1958 to 1978 are analyzed, and the dominant policies in effect during this period are identified using this method. A connection between Japanese regional public investment policies and the convergence of population growth across regions is suggested." The suitability of redistributive investment policies as a mechanism for the spatial stabilization of other populations experiencing rapid economic growth is noted.