This paper examines how labor market flexibility affects the output effect of a public investment shock by using panel data OECD countries. We identify as forecast error spending and employ local projection method to estimate its on output. Our empirical analysis shows that shock. While positive boosts significantly in economies with flexible markets, responses are not statistically significant...

Using the short-term multi-sector econometric model, this paper discusses in detail the multiplier effect of public investment in Japan. After examining its fundamental characteristics, the differ ence in government investment multiplier by the pattern of investment distribution among indus tries and the factors causing such a difference are analyzed. According to the simulation results, the mu...

We develop a political-economic model of sovereign debt that shows that income inequality leads to popular pressures on the government to use foreign debt to Þnance a redistribution of income at the expense of productive public investment. Recognizing this fact international lenders impose credit ceilings with the consequence that developing country borrowers invest less and grow slower. ∗We ar...

The productivity e¤ect of public infrastructure investment is controversial in the traditional literature using aggregate production function estimation, mainly due to reverse causality. This paper develops a new approach, using a model of endogenous productivity in a …rm-level production function, and matching Chinese …rm-level production data with province-level infrastructure data. The estim...

Recent developments, such as privatization and the private finance initiative, have raised the issue of which assets should be owned by the public sector and whether assets have different values in the public and private sectors. In order to answer these questions, we first note that the allocative considerations that usually motivate government intervention need not require the direct provisio...

To analyze ways in which aid can be made more effective, we develop a growth model in which aid finances infrastructure investment and pro-poor spending. We assume that the recipient countries are aid-dependent in the early phase of development and ultimately become independent. In the model, donors can accelerate the independence of a recipient from aid by investing in infrastructure. We demon...

Because of external financing costs, private business owners often need to self-finance new investment projects. These self-financing needs create an incentive for business owners to hold financial assets whose payoffs are positively correlated with self-financing needs. If this effect is aggregated, expected returns on financial assets should be negatively correlated with aggregate private inv...