Public investment in transportation infrastructure and economic performance in Portugal

Pereira, Alfredo; Andraz, Jorge Miguel

http://hdl.handle.net/10400.1/4754

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Authors

Pereira, Alfredo

Andraz, Jorge Miguel

Abstract(s)

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.

Keywords

Public investment Economic Performance

URI

http://hdl.handle.net/10400.1/4754

Citation

Pereira, Alfredo M.; Andraz, Jorge M.Public Investment in Transportation Infrastructure and Economic Performance in Portugal, Review of Development Economics, 9, 2, 177-196, 2005