Explaining public investment in Western Europe

Abstract: Budgetary consolidations are considered the obvious explanation for the decline in public investment that most Western European countries experienced over the past three decades. However, regressions based on budgetary variables tend to overpredict public investment during the post 1990-period, i.e., when the budgetary stress eased. We supplement the budgetary consolidation approach to public investment with ideas from behavioural economics to explain why these investments do not increase when additional budgetary resources are available. We use the peak/end evaluation procedure to capture the frustration of voters as cuts in government consumption expenditures accumulate. This ‘memory-effect’ of budgetary consolidations implies that voters recall the previous peak government consumption expenditures. They remain discontent as long as current expenditures are below the peak value. When the budgetary situation improves, policy makers will choose to increase government consumption be

Object Details

• Location: Deutsche Nationalbibliothek Frankfurt am Main
• Extent: Online-Ressource
• Language: Englisch
• Notes: Postprint ; begutachtet (peer reviewed) ; In: Applied Economics ; 42 (2010) 14 ; 1783-1796

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Veröffentlichung
• (where): Mannheim
• (when): 2010
• Creator: Vuchelen, Jef ; Caekelberg, Stijn

Further information

• DOI: 10.1080/00036840701736180
• URN: urn:nbn:de:0168-ssoar-253983
• Rights: Open Access unbekannt; Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
• Last update: 25.03.2025, 1:48 PM CET