TITLE:
Short and Long-Run Effects of Public Investment: Theoretical Premises and Empirical Evidence
AUTHORS:
Pasquale Lucio Scandizzo, Maria Rita Pierleoni
KEYWORDS:
Public Investment, Multiplier, Models Employed, Persistence of the Multiplier
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.4,
August
12,
2020
ABSTRACT: This survey focuses on the impact of public
investment as an instrument of economic policy. The study presents and analyzes
features and results of the empirical works on this theme taking into account
both theory and estimations issues. In general, the studies surveyed support
the idea that public investment, if projects are properly selected, raises
output and welfare through both demand and supply effects and thus should be
the instrument of choice of economic policy for governments and public
agencies. Moreover, a considerable amount of empirical studies show that public
investments have higher positive growth effects than public consumption both in
the short and in the long run. In spite of a great diversity in the theoretical
approaches and the empirical results, the studies surveyed tend to converge in
many indications that can be useful to policy makers. Among these, in addition
to several pointers on the reasons why public investments may be made more
effective, is that a major challenge is to provide a new generation of global
public goods for sustainable development.