Public Investment Multipliers in EU Countries: Does the Efficiency of Public Sector Matter?

34 Pages Posted: 28 Mar 2016

See all articles by Sotiris Papaioannou

Sotiris Papaioannou

Centre of Planning and Economic Research

Date Written: March 13, 2016

Abstract

This study examines whether differences in public sector efficiency are associated with diverging effects of public investment on growth. At first stage, we estimate public investment multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we construct measures of public sector efficiency which are used in the econometric analysis to study the relationship between public investment and growth. The main result of the econometric analysis is that the efficiency of public sector indeed matters in raising the influence of public investment on growth. This result remains robust to several changes in the econometric specification and to various measures of government efficiency which used as explanatory variables in the econometric estimations.

Keywords: Public investments, Fiscal multipliers, Public sector efficiency, Economic growth

JEL Classification: E62, H30, O40

Suggested Citation

Papaioannou, Sotiris, Public Investment Multipliers in EU Countries: Does the Efficiency of Public Sector Matter? (March 13, 2016). Available at SSRN: https://ssrn.com/abstract=2755247 or http://dx.doi.org/10.2139/ssrn.2755247

Sotiris Papaioannou (Contact Author)

Centre of Planning and Economic Research ( email )

Amerikis 11
Athens, 10672
Greece

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