Public Investment and Regional Growth and Convergence: Evidence from Greece

35 Pages Posted: 28 Sep 2012

See all articles by Yannis Psycharis

Yannis Psycharis

Panteion University of Athens

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment

Vassilis Tselios

London School of Economics & Political Science (LSE) - Department of Economics; Newcastle University - Centre for Urban and Regional Development Studies

Date Written: March 2012

Abstract

This paper estimates the impact of public investment on regional economic growth and convergence at the NUTS III level in Greece. Using a new database of public expenditure per region for the period 1978-2007, it proposes a model which captures not just the impact of public investment in Greek prefectures, but also the spillover effects related to the existence of externalities from neighbouring regions. The results point to a positive long-run impact of public investment per capita on regional economic growth – but not on convergence – which also generates considerable spillover effects. However, the returns vary according to different types of public investment, with education and infrastructure spillovers having the highest impact. In general, public investment externalities seem to be more relevant for regional growth than direct public investment in each region. Finally, the impact of different types of public investment in Greece is mediated by politics and political factors, but the effect of politics disappears once we control for political-period-specific spatial-invariant variables.

Keywords: convergence, economic growth, Greece, public investment, regional economics, regional policy, spatial econometrics, spillover effects

JEL Classification: R11, R12, R53, R58

Suggested Citation

Psycharis, Yannis and Rodríguez-Pose, Andrés and Tselios, Vassilis, Public Investment and Regional Growth and Convergence: Evidence from Greece (March 2012). CEPR Discussion Paper No. DP9011. Available at SSRN: https://ssrn.com/abstract=2153443

Yannis Psycharis (Contact Author)

Panteion University of Athens ( email )

Athens
Athens 117 45
Greece

Andrés Rodríguez-Pose

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Vassilis Tselios

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Newcastle University - Centre for Urban and Regional Development Studies

Newcastle NE1 7RU
United Kingdom

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