Public Investment in Developing Countries: A Blessing or a Curse?

By Eduardo A. Cavallo, Christian Daude. 2008

216 citations recorded by the source corpus.

This paper analyzes the impact of public investment on private investment in 116 developing countries between 1980 and 2006. It finds a strong crowding-out effect that seems to be the norm rather than the exception, both across regions and over time. This effect is dampened (or even reversed) in countries with better institutions that are more open to international trade and financial flows. These results confirm that while public infrastructure may complement private capital, distortions associated with the public investment process might crowd out private investment in the course of building public capital stocks. These distortions are more prevalent in countries with weak institutions or closed economies.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/6ac245d9a8ffefa3d68334d465c628550644da52

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Citations in the corpus

Institutions, Foreign Direct Investment, and Domestic Investment: Crowding Out or Crowding In? (2016, background): “…the World Bank, and the International Monetary Fund) on private sector investment also shows mixed results of crowding in and crowding out (Cavallo and Daude, 2011; Belloc and Vertova, 2006; Erden and Holcombe, 2006; Atukeren, 2010; Bird and Rowlands, 2001; Butkiewicz and Yanikkaya, 2005).”