"Crowding in" and the Returns to Government Investment in Low-Income Countries
This paper estimates the effect of government investment on private investment in a sample of 39 low-income countries. Fluctuations in a predetermined component of disbursements on loans from official creditors to developing country governments are...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/02/19005742/crowding-returns-government-investment-low-income-countries http://hdl.handle.net/10986/17337 |
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okr-10986-173372021-04-23T14:03:37Z "Crowding in" and the Returns to Government Investment in Low-Income Countries Eden, Maya Kraay, Aart AFFILIATED ORGANIZATIONS BANK LENDING BANK POLICY BORROWING BORROWING COUNTRY CAPITAL ACCUMULATION CAPITAL SHARE CAPITAL STOCK CAPITAL STOCKS CLOSED ECONOMY CONSUMPTION EXPENDITURES COST OF CAPITAL COST OF FUNDS COUNTRY FIXED EFFECTS CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIMINISHING RETURNS DIRECT FINANCING DISBURSEMENT DISBURSEMENTS ECONOMIC GROWTH ECONOMICS EQUALITY EXCESS RETURN EXCESS RETURNS EXCLUSION FACTORS OF PRODUCTION FINANCING COSTS FISCAL POLICY GLOBAL MARKETS GOVERNMENT DEBT GOVERNMENT INVESTMENT GOVERNMENT INVESTMENTS GOVERNMENT SPENDING INCOME INDIVIDUAL LOANS INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE INVESTMENT INSTRUMENT INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT DECISIONS INVESTMENT EXPENDITURES INVESTMENT PROJECTS INVESTMENT RATES LOAN LOAN APPROVAL LOCAL CURRENCY LOW-INCOME COUNTRIES MULTIPLIER EFFECT NPL OIL PRICES OPEN ECONOMY OUTPUT POLICY RESPONSE POLITICAL ECONOMY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE CAPITAL STOCKS PRIVATE INVESTMENT PRIVATE INVESTORS PUBLIC INVESTMENT RATE OF RETURN RATES OF RETURN REPAYMENT RETURN RETURNS WORLD DEVELOPMENT INDICATORS This paper estimates the effect of government investment on private investment in a sample of 39 low-income countries. Fluctuations in a predetermined component of disbursements on loans from official creditors to developing country governments are used as an instrument for fluctuations in public investment. The analysis finds evidence of "crowding in": an extra dollar of government investment raises private investment by roughly two dollars, and output by 1.5 dollars. To understand the implications for the return to public investment, a CES production function with public and private capital as inputs is calibrated. For most countries in the sample, the returns to government investment exceed the world interest rate. However, for some countries that already have high government investment rates, the return to further investment is below the world interest rate. 2014-03-18T21:42:14Z 2014-03-18T21:42:14Z 2014-02 http://documents.worldbank.org/curated/en/2014/02/19005742/crowding-returns-government-investment-low-income-countries http://hdl.handle.net/10986/17337 English en_US Policy Research Working Paper;No. 6781 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AFFILIATED ORGANIZATIONS BANK LENDING BANK POLICY BORROWING BORROWING COUNTRY CAPITAL ACCUMULATION CAPITAL SHARE CAPITAL STOCK CAPITAL STOCKS CLOSED ECONOMY CONSUMPTION EXPENDITURES COST OF CAPITAL COST OF FUNDS COUNTRY FIXED EFFECTS CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIMINISHING RETURNS DIRECT FINANCING DISBURSEMENT DISBURSEMENTS ECONOMIC GROWTH ECONOMICS EQUALITY EXCESS RETURN EXCESS RETURNS EXCLUSION FACTORS OF PRODUCTION FINANCING COSTS FISCAL POLICY GLOBAL MARKETS GOVERNMENT DEBT GOVERNMENT INVESTMENT GOVERNMENT INVESTMENTS GOVERNMENT SPENDING INCOME INDIVIDUAL LOANS INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE INVESTMENT INSTRUMENT INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT DECISIONS INVESTMENT EXPENDITURES INVESTMENT PROJECTS INVESTMENT RATES LOAN LOAN APPROVAL LOCAL CURRENCY LOW-INCOME COUNTRIES MULTIPLIER EFFECT NPL OIL PRICES OPEN ECONOMY OUTPUT POLICY RESPONSE POLITICAL ECONOMY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE CAPITAL STOCKS PRIVATE INVESTMENT PRIVATE INVESTORS PUBLIC INVESTMENT RATE OF RETURN RATES OF RETURN REPAYMENT RETURN RETURNS WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
AFFILIATED ORGANIZATIONS BANK LENDING BANK POLICY BORROWING BORROWING COUNTRY CAPITAL ACCUMULATION CAPITAL SHARE CAPITAL STOCK CAPITAL STOCKS CLOSED ECONOMY CONSUMPTION EXPENDITURES COST OF CAPITAL COST OF FUNDS COUNTRY FIXED EFFECTS CREDITOR CREDITORS DEBTOR DEBTOR REPORTING SYSTEM DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIMINISHING RETURNS DIRECT FINANCING DISBURSEMENT DISBURSEMENTS ECONOMIC GROWTH ECONOMICS EQUALITY EXCESS RETURN EXCESS RETURNS EXCLUSION FACTORS OF PRODUCTION FINANCING COSTS FISCAL POLICY GLOBAL MARKETS GOVERNMENT DEBT GOVERNMENT INVESTMENT GOVERNMENT INVESTMENTS GOVERNMENT SPENDING INCOME INDIVIDUAL LOANS INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE INVESTMENT INSTRUMENT INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTING INVESTMENT DECISIONS INVESTMENT EXPENDITURES INVESTMENT PROJECTS INVESTMENT RATES LOAN LOAN APPROVAL LOCAL CURRENCY LOW-INCOME COUNTRIES MULTIPLIER EFFECT NPL OIL PRICES OPEN ECONOMY OUTPUT POLICY RESPONSE POLITICAL ECONOMY PRIVATE CAPITAL PRIVATE CAPITAL STOCK PRIVATE CAPITAL STOCKS PRIVATE INVESTMENT PRIVATE INVESTORS PUBLIC INVESTMENT RATE OF RETURN RATES OF RETURN REPAYMENT RETURN RETURNS WORLD DEVELOPMENT INDICATORS Eden, Maya Kraay, Aart "Crowding in" and the Returns to Government Investment in Low-Income Countries |
| relation |
Policy Research Working Paper;No. 6781 |
| description |
This paper estimates the effect of
government investment on private investment in a sample of
39 low-income countries. Fluctuations in a predetermined
component of disbursements on loans from official creditors
to developing country governments are used as an instrument
for fluctuations in public investment. The analysis finds
evidence of "crowding in": an extra dollar of
government investment raises private investment by roughly
two dollars, and output by 1.5 dollars. To understand the
implications for the return to public investment, a CES
production function with public and private capital as
inputs is calibrated. For most countries in the sample, the
returns to government investment exceed the world interest
rate. However, for some countries that already have high
government investment rates, the return to further
investment is below the world interest rate. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Eden, Maya Kraay, Aart |
| author_facet |
Eden, Maya Kraay, Aart |
| author_sort |
Eden, Maya |
| title |
"Crowding in" and the Returns to Government Investment in Low-Income Countries |
| title_short |
"Crowding in" and the Returns to Government Investment in Low-Income Countries |
| title_full |
"Crowding in" and the Returns to Government Investment in Low-Income Countries |
| title_fullStr |
"Crowding in" and the Returns to Government Investment in Low-Income Countries |
| title_full_unstemmed |
"Crowding in" and the Returns to Government Investment in Low-Income Countries |
| title_sort |
"crowding in" and the returns to government investment in low-income countries |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/02/19005742/crowding-returns-government-investment-low-income-countries http://hdl.handle.net/10986/17337 |
| _version_ |
1764436898303967232 |