Does higher government spending depress private investment?
by Nikiforos T. Laopodis
Global Business and Economics Review (GBER), Vol. 3, No. 1, 2001

Abstract: This paper explores the implications of military and nonmilitary government expenditures on gross private investment. The empirical investigation of the issue is carried out via cointegration and error-correction analyses. The second type of public spending is disaggregated into infrastructure, consumption and other general government expenditures. The evidence from four emerging European countries namely, Greece, Ireland, Portugal and Spain, suggests that in some cases public capital spending complements and stimulates investment, while in others it discourages it. Moreover, the results tentatively indicate that defense spending does not impact private investment, thus contributing to the continuing debate of the economic effects of military spending.

Online publication date: Mon, 07-Feb-2005

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