Factor Mobility, Government Debt and the Decline in Public Investment

Heinemann, Friedrich

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URL:	http://ub-madoc.bib.uni-mannheim.de/425
URN:	urn:nbn:de:bsz:180-madoc-4257
Document Type:	Working paper
Year of publication:	2002
The title of a journal, publication series:	None
Publication language:	English
Institution:	Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject:	330 Economics
Classification:	JEL: H50 H87 H63 ,
Subject headings (SWD):	OECD , Europäische Union , Maastrichter Vertrag , Öffentliche Investition
Abstract:	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.
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