Linking public investment to private investment. The case of the Spanish regions

Abstract

Public investment constitutes one of the main axes of the regional policies. The existence of a direct link between infrastructure and regional income per capita is generally accepted. Also literature describes a positive effect of public investor effort on private capital accumulation. This paper seeks to offer empirical evidence of this latter relationship for the case of the Spanish regions over period 1965-1995. We use a crowding-out theoretical framework and panel data methodology. The results show a positive effect of productive and social public capital on private investment and productivity of private capital. The spillovers effects generated by infrastructures located in other regions do not seem to encourage private investment in an individual region.Crowding-out, infrastructures, panel data, unit roots.