Portuguese Economic Journal

, Volume 18, Issue 1, pp 47–65 | Cite as

Economic growth, public, and private investment returns in 17 OECD economies

  • António AfonsoEmail author
  • Miguel St. Aubyn
Original Article


We study the macroeconomic effects of public and private investment in 17 OECD economies through a VAR analysis with annual data from 1960 to 2014. From impulse response functions we find that public investment had a positive growth effect in most countries, and a contractionary effect in Finland, UK, Sweden, Japan, and Canada. Public investment led to private investment crowding o ut in Belgium, Ireland, Finland, Canada, Sweden, the UK and crowding-in effects in the rest of the countries. Private investment has a positive growth effect in all countries; crowds-out (crowds-in) public investment in Belgium and Sweden (in the rest of the countries). The partial rates of return of public and private investment are mostly positive. Our results are robust to the ordering of private and public investment in the VAR.


Fiscal policy Public investment Private investment Crowding-in Macroeconomic rates of return Impulse response functions VAR 

JEL Classification

C32 E22 E62 



We thank an anonymous referee, the editor, and Narcissa Balta and participants at the DG ECFIN Workshop on “Fiscal policy after the crisis”, January 2016, Brussels, at the Portuguese Economic Journal Conference, July 2016, Coimbra, and at the 19th Infer Annual Conference, Bordeaux, June 2017, for useful comments and suggestions. The opinions expressed herein are those of the authors and do not necessarily reflect those of their employers.

UECE is supported by FCT (Fundação para a Ciência e a Tecnologia, Portugal).


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Copyright information

© ISEG 2018

Authors and Affiliations

  1. 1.REM – Research in Economics and Mathematics, UECE – Research Unit on Complexity and EconomicsISEG-UL – Universidade de LisboaLisbonPortugal

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