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Public Investment in Transportation Infrastructure and Economic Performance in Portugal
Author(s) -
Pereira Alfredo M.,
Andraz Jorge M.
Publication year - 2005
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2005.00271.x
Subject(s) - investment (military) , euros , economics , public investment , crowds , return on investment , revenue , public finance , perspective (graphical) , public infrastructure , open ended investment company , term (time) , public capital , tax revenue , public economics , economic policy , finance , macroeconomics , public fund , production (economics) , philosophy , physics , computer security , quantum mechanics , artificial intelligence , politics , political science , humanities , computer science , law
In this paper, we use a VAR approach to investigate the effects of public investment in transportation infrastructures on private investment, employment, and output in Portugal. Estimation results suggest that public investment crowds in private investment and employment, and has a strong positive effect on output. We estimate that one euro in public investment increases output in the long‐term by 9.5 euros, which corresponds to a rate of return of 15.9%. These figures imply that there are strong long‐term budgetary benefits from public investment in the form of increased future tax revenues. A closer look at the effects of different types of public investment uncovers the same general patterns. These results are very important from a public policy perspective. They suggest that the strategy followed by the Portuguese authorities of investing in public infrastructures is justified, both from a long‐term development perspective and a long‐term public budgetary perspective.