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- Public investment in transportation infrastructure and economic performance in PortugalPublication . Pereira, Alfredo; Andraz, Jorge MiguelIn 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.
- Theoretical approaches and empirical results on the economic effects of public investmentPublication . Andraz, Jorge Miguel; Pereira, AlfredoThis paper presents an extensive discussion of the literature on the economic impact of public investment on infrastructures both for the US and internationally. The paper expands the focus of previous surveys by concentrating on empirical econometric studies about the effects of public investment as well as on the evolution of the methodological issues motivated by criticisms. From the empirical results reported in the literature, there is a general evidence that suggests that nonmilitary public investment contributes significantly to output growth and production costs reduction, not only as a direct input to production function, but also by its influence on private factors of production. This evidence raises the importance of the endogeneity of private inputs and also public investment, as well as the direction of causality. The studies performed at sectoral and regional levels show very often unbalanced effects from public investment. Moreover, as the geographic focus narrows,the estimated elasticities with respect to public capital become smaller, which suggests the existence of spillover effects.
- On the economic effects of public infrastructe investment: a survey of the international evidencePublication . Pereira, Alfredo; Andraz, Jorge MiguelThis paper provides a survey of the significant literature on the effects of public infrastructure investment on economic performance and therefore constitutes a comprehensive reference for academic researchers and policy makers alike. It presents a comprehensive discussion of the empirical research regarding the impact of public infrastructure investment on economic performance in terms of both the methodological approaches followed and respective conclusions. It includes an integrated discussion of the methodological developments that successively have led to the estimation of production functions, cost and profit functions and, more recently, vector autoregressive models. Finally, it identifies some important areas for future research and highlights the natural convergence of this literature with the macroeconomic literature on the effects of fiscal policies.
- Theoretical approaches and empirical results on the economic effects of public investmentPublication . Andraz, Jorge Miguel; Pereira, AlfredoThis paper presents an extensive discussion of the literature on the economic impact of public investment on infraestrutures both for the US and internationality.
- On the regional incidence of public investment in highways in the USAPublication . Pereira, Alfredo; Andraz, Jorge MiguelThe objective of this paper is to investigate the regional incidence of the aggregate effects of public investment in highways in the US taking into consideration the possible existence of regional spillovers. The empirical results are based on VAR estimates at both the aggregate and state levels using private output, employment, and investment, as well as different measures of public investment. Empirical results allow us to establish several stylized facts. First, public investment in highways affects private sector variables positively at the aggregate level as well as in most states. Second, overall, the spillover effects of public investment in highways are at least 80% of the total effects for all private sector variables. Third, the spillovers have a clear geographical pattern in that they tend to be more important in western states and the corridor between the Great Lakes and the Gulf Coast. Fourth, we find that relative to their share of the US private sector variables, the biggest beneficiaries of public investment in highways tend to be the largest states in the country. This suggests that public investment in highways has contributed to concentration of private sector activity in the largest states.
- On the economic and fiscal effects of investment in road infrastructure in PortugalPublication . Pereira, Alfredo; Andraz, Jorge MiguelThe objective of this paper is to investigate the economic and fiscal impact of road infrastructure investment in Portugal, focusing on the effects for each administrative region of both local investments and investments in other regions. We estimate VAR models for the national economy as well as for each of the five regions, and using the associated impulse-response functions we find that investment in road infrastructures has been a powerful instrument to increase private investment, to create new permanent jobs and to promote long-term growth in all regions. More importantly, investment in road infrastructure, both at the aggregate level and for each one of the five regions, generates fiscal effects that largely exceed the initial investment itself. Accordingly, there is no trade-off in the long-term between the potentially positive economic effects and the potentially negative budgetary effects of such investments, i.e., both economic and budgetary effects are positive. As a corollary, policies that would reduce current road investment as a response to the current budgetary concerns will result in lower long-term growth as well as worse budgetary conditions in the future.
- On the economic effects of investment in railroad infrastructures in PortugalPublication . Pereira, Alfredo; Andraz, Jorge MiguelThe objective of this paper is to identify the effects of railroad infrastructure investment on aggregate and regional economic performance in Portugal. At the aggregate level, we show that railroad investment crowds in private investment and employment and have strong effects on output. At the regional level, we show that railroad investment affects private investment positively in all regions, employment in only Lisbon and the North, and output in all regions with the exception of Alentejo. The effects are regionally distributed in a rather uneven manner with Lisbon and the North capturing the bulk of the effects. Our results also highlight the relevance of regional spillovers. In terms of the relative effects of comparable railroad investment in the region and elsewhere in the country, we find that the North and the Center benefit more from investment elsewhere while the remaining regions benefit more from local investment. Finally, from a country-wide perspective, railroad investment located in Lisbon generates the largest marginal benefits, which reflect, mostly, the large effects in the Lisbon region itself. By contrast, railroad investment in the remaining regions has a much lower marginal benefit to the country, but these benefits reflect mostly spillovers. This highlights the difficulty in implementing policies that simultaneously maximize aggregate growth and reduce regional disparities.