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Investment in OECD Countries: a Primer

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Abstract

Aggregate business investment is a major driver of long-term economic growth. It has been weak in many advanced economies over the last decade, partly due to cyclical demand-side effects. Nevertheless, a number of structural factors and policies interact with and have an effect on business investment. This paper provides a survey of the literature on the main policy drivers of business investment such as finance (including bank and market finance, venture capital and the debt bias in corporate taxation), tax policies, foreign direct investment, product and labour market and environmental regulations, the importance of an efficient insolvency regime, the negative impact of (regulatory) uncertainty and the role of infrastructure investment as a support for business investment.

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Fig. 1

Source: Panel A: Author’s calculations using data drawn from the OECD Economic Outlook database; Panel B: Ollivaud et al. (2016)

Fig. 2

Source: Author’s calculations based on data drawn from the OECD Economic Outlook database

Fig. 3

Source: Author’s calculations based on data drawn from the OECD Economic Outlook database

Fig. 4
Fig. 5

Source: Sorbe and Johansson (2016)

Fig. 6

Source: Calculations based on Égert and Gal (2016)

Fig. 7

Source: Adalet McGowan and Andrews (2016)

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Notes

  1. There are several alternative models, which help better understand the drivers of aggregate investment. They include the accelerator model, standard neoclassical models of investment, Tobin’s Q and the Euler equation. A systematic comparison of alternative models for the US economy indicates that the accelerator model tended to outperform other models until the early 1990s (Oliner et al. 1995).

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Authors and Affiliations

  1. OECD Economics Department, Paris, France

    Balázs Égert

  2. EconomiX at the University of Paris X-Nanterre, Nanterre, France

    Balázs Égert

  3. CESifo, Munich, Germany

    Balázs Égert

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The author would like to thank an anonymous referee and colleagues at the OECD Economics Department for very useful comments and suggestions. The views expressed in the paper do not reflect the official view of the OECD and any other institution the author is affiliated with.

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Égert, B. Investment in OECD Countries: a Primer. Comp Econ Stud 63, 200–223 (2021). https://doi.org/10.1057/s41294-021-00146-3

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