Public investment across the OECD world: Retrenchment by collateral damage?

Since the 1980s public investment expenditures have been cut back in many OECD democracies. One explanation is a priority for fiscal stringency in order to curb big government in the context of neo-liberal ideas, which is reinforced by EMU requirements in the 1990s. Another is the potential impact of left and right partisan politics on investment policies. The main finding here is that the overall decrease in public investment expenditure appears to be caused by collateral damage due to the downsizing of total government outlays. This is particularly the case where there is a policy legacy of the Left with high levels of total public spending on the welfare state prior to the 1980s. Where the Right in government has been dominant after 1980, this downward development in public investment is particularly noticeable. Copyright © Cambridge University Press 2010