Public Investment and Fiscal Performance in New EU Member States

Jan Hanousek and Evžen Kočenda

No wp1006, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: In this paper we analyze the dynamics of public investment and public finance in new members of the European Union, and also how these sectors were affected by changes in economic freedom and corruption. When we assess the role of regulation and corruption on public investment, we find that improvements in economic freedom tend to be associated with decreases in public investment, while reductions in corruption produce effects going in both directions. Similarly, we show that increases in public investment are often linked with decreases as well as increases in corruption. In terms of public finance we detect mostly improvement in debt when there is less economic regulation, while results for a deficit are less conclusive. On the other hand, improvements in the corruption environment are mostly associated with decreases in the deficit as well as debt. As a general rule that follows from our results, steps aimed at reducing corruption and the degree of economic regulation should lead towards improvements in the fiscal position in most of the new EU countries.

Keywords: public finance; public investment; economic freedom; corruption; EU convergence and integration; macroeconomic policy; fiscal reforms; new EU members (search for similar items in EconPapers)
JEL-codes: E61 E62 F42 H50 H60 O11 (search for similar items in EconPapers)
Pages: pages
Date: 2010-12-01
New Economics Papers: this item is included in nep-eec, nep-eur, nep-mac, nep-pbe, nep-reg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Public Investment and Fiscal Performance in the New EU Member States (2011)
Working Paper: Public investment and fiscal performance in new EU member states (2010)
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