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Does public capital crowd out private capital? : evidence from India, Volume 1
Author:Serven, Luis; Country:India;
Date Stored:1996/05/01Document Date:1996/05/31
Document Type:Policy Research Working PaperSubTopics:Decentralization; Economic Theory & Research; Inequality; International Terrorism & Counterterrorism; Capital Markets and Capital Flows; Banks & Banking Reform; Environmental Economics & Policies; Economic Stabilization
Language:EnglishMajor Sector:Public Administration, Law, and Justice
Region:South AsiaReport Number:WPS1613
Sub Sectors:Public Financial ManagementCollection Title:Policy, Research working paper ; no. WPS 1613
Volume No:1  

Summary: A recent but rapidly growing empirical literature focuses on the relationship between public and private capital. But for the most part, it ignores the heterogeneity of public investment. In many countries, especially in the developing world, public investment includes not only basic infrastructure projects, but also commercial and industrial projects similar to those undertaken by the private sector. And those two types of public investment are likely to have quite different effects on the accumulation of private capital. Using data from India, the author examines this issue empirically by implementing a simple analytical model encompassing two types of public capital. The empirical results show that in the long run capital for public infrastructure projects crowds in private capital - other types of public capital have the opposite effect. But in the short run, both kinds of public investment may crowd out private investment.

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