Do High and Volatile Levels of Public Investment Suggest Misconduct? The Role of Institutional Quality
45 Pages Posted: 20 Apr 2016
Date Written: July 1, 2011
Abstract
This paper investigates the impact of institutional quality on public investment levels over the period 1984-2008. Moreover, it studies how the volatility of public investment and the quality of infrastructure are affected by institutional quality, and explores the contribution of other critical factors. The findings suggest an inverse relationship between public investment levels and institutional quality, supporting the idea that governments use public investment as a vehicle for rent-seeking or to compensate for the fall in private investment due to the poor business environment. In addition, aid flows, revenues and abundance of natural resources contribute positively to the level of capital spending. The author also finds that high volatility of public investment is associated with a lower quality of governance. An increase in revenues is associated with a reduction in the volatility of capital spending, suggesting that proper macroeconomic management smoothes the investment cycle. Finally, the paper provides some tentative evidence of a positive relationship between institutional quality and the quality of infrastructure.
Keywords: Investment and Investment Climate, Debt Markets, Non Bank Financial Institutions, Public Sector Economics, Emerging Markets
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Effects of Infrastructure Development on Growth and Income Distribution
By César A. Calderón and Luis Servén
-
Investing in Infrastructure: What is Needed from 2000 to 2010?
By Marianne Fay and Tito Yepes
-
Infrastructure in Latin America
By César Calderón and Luis Servén
-
Trends in Infrastructure in Latin America, 1980-2001
By César A. Calderón and Luis Servén
-
The Social Rate of Return on Infrastructure Investments
By David Canning and Esra Bennathan
-
By Esther Duflo and Rohini Pande