Artikel

Public investment a key prerequisite for private sector activity

Ten years after the 2008 financial crisis, in the euro area investment is still below the pre-crisis level. Public and private investment growth is so weak that capital per worker (capital intensity) has virtually remained constant. An increase in public investment activity could ultimately stimulate private investment. Estimates for the euro area show that an increase in public investment by one billion euro goes hand in hand with a medium-term increase in private investment of around 1.1 billion euro. In Germany, the effect is somewhat greater. Investment in construction and infrastructure are the most significant drivers. The public sector's widespread reluctance to invest could partially explain the weakness in private investment activity. The public sector should now begin investing more. And the rigid balanced budget amendment (Schuldenbremse) should be replaced by more flexible expenditure rules.

Language
Englisch

Bibliographic citation
Journal: DIW Weekly Report ; ISSN: 2568-7697 ; Volume: 9 ; Year: 2019 ; Issue: 31 ; Pages: 255-261 ; Berlin: Deutsches Institut für Wirtschaftsforschung (DIW)

Classification
Wirtschaft
Investment; Capital; Intangible Capital; Capacity
Fiscal Policy
National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
Subject
investment
crowding in
public finance

Event
Geistige Schöpfung
(who)
Clemens, Marius
Goerge, Marius
Michelsen, Claus
Event
Veröffentlichung
(who)
Deutsches Institut für Wirtschaftsforschung (DIW)
(where)
Berlin
(when)
2019

DOI
doi:10.18723/diw_dwr:2019-31-2
Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Artikel

Associated

  • Clemens, Marius
  • Goerge, Marius
  • Michelsen, Claus
  • Deutsches Institut für Wirtschaftsforschung (DIW)

Time of origin

  • 2019

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