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What Have We Learned about the Effectiveness of Infrastructure Investment as a Fiscal Stimulus A Literature Review (Inglês)

Since the Great Depression of the 1930s, and through the more recent Asian Crisis of 1997 and Great Recession of 2008/09, governments have experimented with Keynesian style fiscal stimulus to support employment and accelerate economic recovery. The effectiveness of these policies depends on the size of fiscal multipliers. A large body of economic literature has estimated such multipliers, with gradually increasing precision, due to econometric improvements and better ways to identify fiscal impulses. Overall, the largest multipliers are found to be associated with public investment, as opposed to other types of spending. Such public investment multipliers are typically below one in the short run, but studies with multi-year horizons suggest that values higher than unity can be attained over time. The size of multipliers is sensitive to economic conditions. During recessions, and periods of high unemployment, transfer payments appear sometimes to offer higher multipliers than public investment. An important exception is when fiscal and monetary policies are closely coordinated and interest rates approach zero, conditions that provide the strongest evidence for the efficacy of public investment multipliers. Other institutional factors also play a crucial role in determining the size of the public investment multiplier, in particular the country’s absorptive capacity, and the selection of high-quality shovel ready projects. However, there is limited empirical evidence available on the magnitude of fiscal multipliers in developing country settings, or for infrastructure sectors or subsectors specifically. The few studies available suggest that certain types of green infrastructure (energy efficiency, solar energy, and so forth) may bring employment benefits in the short run, while innovative digital infrastructure may yield longer-run benefits for economic growth. The relevance of these findings to the current COVID-19 crisis is explored.

Detalhes

  • Autor

    Vagliasindi,Maria, Gorgulu,Nisan

  • Data do documento

    2021/10/06

  • TIpo de documento

    Documento de trabalho sobre pesquisa de políticas

  • No. do relatório

    WPS9796

  • Nº do volume

    1

  • Total Volume(s)

    1

  • País

    Mundo,

  • Região

    Regiões Mundiais,

  • Data de divulgação

    2021/10/06

  • Disclosure Status

    Disclosed

  • Nome do documento

    What Have We Learned about the Effectiveness of Infrastructure Investment as a Fiscal Stimulus ? A Literature Review

  • Palavras-chave

    percent rate of return; fiscal multiplier; long-run growth; composition of government spending; marginal cost of production; state-owned enterprise; private investment in infrastructure; change in government spending; long-run effect; public infrastructure investment; fiscal stimulus package; transport and energy; investment in transportation; capital income; fixed exchange rate; capital spending; emerging market economy; fiscal spending; change in expenditure; renewable energy capacity; per capita income; high debt levels; higher government spending; low carbon vehicle; propensity to consume; payment to farmer; panel data set; effect on consumption; value of debt; Job World; foreign currency resources; commodity price movements; terms of skills; flexible exchange rate; impact of investments; presence of corruption; clean energy investment; economic structural reform; roads and highway; infrastructure investment program; target income support; public works program; asian financial crisis; loss of income; investment adjustment cost; stock market collapse; labor market condition; investment in railway; Social Safety Nets; impact of transport; real interest rate; monetary policy; Fiscal policies; fiscal policy; fiscal instrument; tax cut; Public Spending; absorptive capacity; advanced economy; methodological choice; rural transportation infrastructure; time sery; fiscal shock; Learning and Innovation Credit; institutional factor; personal income; impulse response; high unemployment; federal grant; Economic Stimulus; macroeconomic condition; manufacturing jobs; investment multiplier; literature review; asian crisis; real gdp; tax change; business cycle; government expenditure; government consumption; infrastructure sector; green investment; conversion factor; fiscal impulse; private finance; economic recovery; broadband infrastructure; employment multiplier; retail sale; empirical estimate; work relief; automatic stabilizer; Exchange Rates; open economy; infrastructure spending; vector autoregression; average period; first year; telecommunications network; output cost; military spending; public expenditure; communication sector; several steps; job opportunity; job opportunities; full employment; marginal propensity; government transfer; household consumption; consumer sentiment; disposable income; high spending; broadband penetration; external information; tax elasticity; extreme event; broadband deployment; employment impact; recent evidence; negative changes; negative shock; positive shock; traditional infrastructure; it infrastructure; conventional policy; expansionary policy; fiscal plan; high wage; low employment; project costing; Wind Power; investment efficiency; investment boom; output growth; marginal return; Capital Investments; urban transport; efficient building; project selection; building retrofit; environmental review; land transport; water work; infrastructure asset; labor-intensive construction; federal involvement; Job Creation; unemployed worker; infrastructure component; other sectors; stimulus funding; capital stock; income effect; positive spillover; welfare improvement; debt sustainability; average debt; employment effect; Energy Sector; high-debt country; crowding out; ceteris paribus; smaller number; Cash Transfer; telecommunications sector; economic infrastructure; federal government; productive capacity; government effort; high infrastructure; welfare gains; transportation spending; private consumption; rational expectation; high employment; low wage; federal reserve; real effect; clean water; telephone service; capture of state; government fund; discretionary policies; discretionary policy; wage rigidity; local infrastructure; exogenous shock; Federal Stimulus; historical perspective; private activity; federal spending; econometric model; government outlay; econometric analysis; theoretical model; world economy; global experience; economic crisis; dollar term; estimated elasticity; conversion ratio

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