Public Investment as a Fiscal Stimulus: Evidence from Japan’s Regional Spending During the 1990s
IMF Working Papers, April 1, 2010
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- Public Investment as a Fiscal Stimulus: Evidence from Japan’s Regional Spending During the 1990s
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Bibliographic details
- Authors: Anita Tuladhar, Markus Bruckner
- Published: April 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455200696.001
Overview
- Title: Public Investment as a Fiscal Stimulus: Evidence from Japan’s Regional Spending During the 1990s
- Authors: Anita Tuladhar, Markus Bruckner
- Date: April 1, 2010
- Publication type: IMF Working Papers
- Summary finding (from paper): "How effective was public investment in stimulating the Japanese economy during the economic stagnation of the 1990s? Using a dataset of regional public investment spending, we find that investment multipliers were higher than for public consumption, although they were relatively low and declining over time. The paper also finds that the effectiveness of economic infrastructure investment, implemented mainly by the central government, is lower than that of social investment mostly undertaken by local governments. These results suggest that while public investment may yield higher output effects than other spending, its effectiveness depends upon its composition, the level of government implementation, and supply side factors."
Main empirical findings
- Investment multipliers were higher than for public consumption.
- Investment multipliers were relatively low and declining over time.
- Effectiveness of economic infrastructure investment (implemented mainly by the central government) is lower than that of social investment (mostly undertaken by local governments).
- Implication: public investment may yield higher output effects than other spending, but effectiveness depends on:
- composition of investment,
- level of government implementation,
- supply side factors.
Policy implications and interpretation
- Public investment can be more stimulative than public consumption, but:
- low and declining multipliers limit aggregate stimulus potential over time.
- targeting composition toward social investment (largely local government–implemented) appears more effective than central government–implemented economic infrastructure investment.
- Consideration of supply side constraints and implementation level is crucial for designing effective public investment stimulus.
Content in this bundle
- 1. Government Investment Elasticities