Publication:
“Crowding In” Effect of Public Investment on Private Investment Revisited

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dc.contributor.authorFrancois, John Nana
dc.contributor.authorKonte, Maty
dc.contributor.authorRuch, Franz U
dc.date.accessioned2024-08-27T16:38:08Z
dc.date.available2024-08-27T16:38:08Z
dc.date.issued2024-08-27
dc.description.abstractCurrent investment trends in emerging market and developing economies are not enough to meet the needs of their growing populations and will fall short of achieving the Sustainable Development Goals related to human and physical capital development. Public investment can play a critical role in addressing this shortfall, especially if it can crowd-in private investment. Using theory and panel data for 109 developing countries from 1980–2019, this paper investigates whether public investment crowds in or crowds out private investment. The paper also explores how the relationship changes across different groups of countries and under different institutional settings. The analysis uses changes in predicted disbursements on loans from official creditors to developing country governments as an instrument for changes in public investment. The findings show that public investment is a complement to private investment, raising the marginal productivity of the latter. As a result, an extra dollar of public investment raises private investment by 1.6 dollars. The findings also reveal stronger evidence of crowding-in of private investment in low-income countries and Sub-Saharan Africa, where investment needs are greatest. Finally, the findings are embedded in a model with imperfect capital markets, which shows that public investment can be used as an effective vehicle to address underinvestment issues induced by capital market distortions.en
dc.identifierhttp://documents.worldbank.org/curated/en/099758508262487557/IDU1dc47dca51c0df1421119d3711c2f5026019e
dc.identifier.doi10.1596/1813-9450-10881
dc.identifier.urihttps://hdl.handle.net/10986/42097
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10881
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectCAPITAL MARKETS DISTORTIONS
dc.subjectCROWDING-IN
dc.subjectPUBLIC INVESTMENT
dc.subjectPRIVATE INVESTMENT
dc.subjectINSTRUMENTAL VARIABLE
dc.subjectDECENT WORK AND ECONOMIC GROWTH
dc.subjectSDG 8
dc.title“Crowding In” Effect of Public Investment on Private Investment Revisiteden
dc.typeWorking Paper
dspace.entity.typePublication
okr.associatedcontenthttps://reproducibility.worldbank.org/index.php/catalog/225 Link to reproducibility package
okr.crossref.title“Crowding In” Effect of Public Investment on Private Investment Revisited
okr.date.disclosure2024-08-27
okr.date.doiregistration2025-04-07T08:46:18.266468Z
okr.date.doiregistration2025-04-08T16:23:12.041178Z
okr.date.doiregistration2025-04-09T02:55:40.658901Z
okr.date.lastmodified2024-08-26T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099758508262487557/IDU1dc47dca51c0df1421119d3711c2f5026019e
okr.guid099758508262487557
okr.identifier.docmidIDU-dc47dca5-c0df-4211-9d37-1c2f5026019e
okr.identifier.doi10.1596/1813-9450-10881
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10881
okr.identifier.externaldocumentum34381607
okr.identifier.internaldocumentum34381607
okr.identifier.reportWPS10881
okr.import.id5164
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099758508262487557/pdf/IDU1dc47dca51c0df1421119d3711c2f5026019e.pdfen
okr.region.geographicalWorld
okr.topicMacroeconomics and Economic Growth::Investment and Investment Climate
okr.topicFinance and Financial Sector Development::Capital Markets and Capital Flows
okr.topicIndustry::Industrial and Market Data and Reporting
okr.unitProsperity-Eco Pol-Macro/Tax (EMFTX)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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