PUBLIC ENTERPRISE INVESTMENT AND ECONOMIC STABILITY: A SIX COUNTRY COMPARISON *

In the considerable volume of economic literature on public enterprise, one area appears to have been largely overlooked: the impact of public enterprise investment on economic stability. This omission is somewhat surprising, because for several decades economists have demonstrated a growing interest in the relationship of other governmental expenditures and revenues to economic stability. Most of that literature is concerned with the effect of central government budget changes, although in some countries the relationship of state and local government budgets to economic stability has also been studied, and, of course, the automatic or built-in stabilizing effects of social security systems have long been recognized. The lack of study of the stabilizing effects of public enterprise investment may be due in part to the belief that investment is primarily determined by reasons that have little to do with conjunctural considerations, and that anyway its determination is largely outside the influence of the central government. Both positions are open to question, and in any case public enterprise investment does have a de facto impact, the importance of which is worth studying regardless of whether the government uses or is capable of using it as one means of attempting to achieve economic stability. Our purpose in this paper is to determine the extent to which public enterprise investment was a sta'bilizing or destabilizing factor during the eleven-year period from 1955 through 1965 for six countries: Belgium, France, Italy, Sweden, the United Kingdom, and the United States.l The methods of estimating the impact of that investment are