Factor Mobility, Government Debt and the Decline in Public Investment

16 Pages Posted: 8 Aug 2002

See all articles by Friedrich Heinemann

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research; University of Heidelberg - Alfred Weber Institute for Economics

Date Written: February 2002

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.

Keywords: public investment, factor mobility, globalisation, public debt, OECD, EU

JEL Classification: H50, H63, H87

Suggested Citation

Heinemann, Friedrich, Factor Mobility, Government Debt and the Decline in Public Investment (February 2002). ZEW Discussion Paper No. 02-19, Available at SSRN: https://ssrn.com/abstract=319328 or http://dx.doi.org/10.2139/ssrn.319328

Friedrich Heinemann (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
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D-68034 Mannheim, 68034
Germany

HOME PAGE: http://www.zew.de

University of Heidelberg - Alfred Weber Institute for Economics ( email )

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Heidelberg, D-69117
Germany

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