Politico-Economic Determinants of the Crowding-in Effects of Public Investments in Developing Countries

Abstract

This study investigates the politico-economic determinants of the crowding-in effects of public investments in a cross-section of 25 developing countries for the 1975-2000 period using multivariate probit analysis. The estimation results show that public fixed capital investments may crowd in private investments, but this still depends on the developments in the economic, political, and legal environment of business in individual countries. As such, our findings capture the essence of the mixed results found in this literature well and shed further light on the conditions under which public investments are more likely (not) to crowd in private investments in developing countries.