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Too much and too fast? Public investment scaling-up and absorptive capacity

Year: 2016

Type: article

Abstract: A recent trend in several low-income developing countries has been a rapid scaling-up of public investment. It is argued that in the presence of limited absorptive capacity countries are not able – in terms of skills, institutions, and management – to translate additional public investment into sustained output growth. We test for the presence of absorptive capacity constraints using a large dataset of World Bank investment projects, approved between 1970 and 2007 in 80 countries. Our results indicate that projects undertaken in periods of public investment scaling-up are less likely to be successful, although this effect is relatively small, especially in poor and capital scarce countries. We also verify that this effect is unrelated to large aid flows and donor fragmentation.

Source: Journal of Development Economics

DOI: 10.1016/j.jdeveco.2015.12.005

Author: Andrea F. Presbitero

Institutions: Marche Polytechnic University, International Monetary Fund

Language: English

Topic: Fiscal Policy and Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $4,590