Three essays on public investment versus private investment

Doutoramento em EconomiaThe capacity of public consumption, public investment, and private investment to influence the economic activity has been a research topic for decades, however, there is no consensus about the qualitative effects of fiscal policy. The main goal of this dissertation is to deepen the understanding about what role public intervention, through PPPs, public consumption, and public investment, may play in boosting economic activity and to compare it with the results from innovations in private investment. In the first essay the macroeconomic impact of investment in PPPs, public and private investment in Portugal was tested using a VAR model. The results show that public and private investment has a positive effect in GDP while investment in PPP reduces the Portuguese output. Moreover, an increase in PPP investment crowds-out both private and public investment, while public investment presents a crowding-in effect in both private investment and investment in PPP; and private investment shows the same crowding-in effect in both investment in PPP and public investment. In the second essay, a VAR was applied to a panel data for 14 OECD countries to investigate the dynamic impact of public consumption, public investment, and private investment on the average output of these countries. We find that public consumption plays an active role only in those economies which suffered severe economic consequences in the recent crisis. On the contrary, private investment allows a boost in the output of all the countries under analysis. Finally, in the third essay, a GVAR approach was used to test for the cross- country spillover effects of an increase in public and private investment in 16 countries. The findings show statistically significant cross-border effects mainly in neighboring countries, with the magnitude of the impacts being modest.N/