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Public Investment in Infrastructure in Latin America: Is Debt the Culprit?

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  • Lora, Eduardo
Abstract
Panel data for seven Latin American countries are used to assess the influence of public indebtedness on public investment in infrastructure in the period 1987-2001. Debt increases are associated with higher public infrastructure investment, an effect that is robust to the inclusion of many other fiscal and macroeconomic variables. This paper also finds some evidence of complementarity between public and private investment and of the negative effect of IMF adjustment loans on infrastructure expenditures. No evidence is found that debt defaults affect public investment in infrastructure

Suggested Citation

  • Lora, Eduardo, 2007. "Public Investment in Infrastructure in Latin America: Is Debt the Culprit?," IDB Publications (Working Papers) 1600, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:1600
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    1. Geske Dijkstra & Niels Hermes, 2001. "The Uncertainty of Debt Service Payments and Economic Growth of HIPCs: Is there a Case for Debt Relief?," WIDER Working Paper Series DP2001-122, World Institute for Development Economic Research (UNU-WIDER).
    2. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 24(1), pages 3-20, Junio.
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    4. Mahdavi, Saeid, 2004. "Shifts in the Composition of Government Spending in Response to External Debt Burden," World Development, Elsevier, vol. 32(7), pages 1139-1157, July.
    5. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 24(1), pages 3-20, Junio.
    6. César Calderón & Luis Servén, 2004. "Trends in Infrastructure in Latin America, 1980-2001," Working Papers Central Bank of Chile 269, Central Bank of Chile.
    7. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
    8. Lora, Eduardo & Olivera, Mauricio, 2007. "Public debt and social expenditure: Friends or foes?," Emerging Markets Review, Elsevier, vol. 8(4), pages 299-310, December.
    9. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 19-24, January.
    10. Toan Quoc Nguyen & Mr. Benedict J. Clements & Ms. Rina Bhattacharya, 2003. "External Debt, Public Investment, and Growth in Low-Income Countries," IMF Working Papers 2003/249, International Monetary Fund.
    11. Ms. Hélène Poirson & Mr. Luca A Ricci & Ms. Catherine A Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 2004/015, International Monetary Fund.
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    Cited by:

    1. Cavallo, Eduardo & Daude, Christian, 2011. "Public investment in developing countries: A blessing or a curse?," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 65-81, March.
    2. Yang, Bofei & Zhu, Shengjun, 2022. "Public funds in high-tech industries: A blessing or a curse," Socio-Economic Planning Sciences, Elsevier, vol. 83(C).
    3. Ibrahim Mohammed Adamu, 2016. "Public Investment in Nigeria. Does External Debt Matter?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(4), pages 120-138, December.
    4. repec:agr:journl:v:4(605):y:2015:i:4(605):p:189-198 is not listed on IDEAS
    5. Rozas, Patricio, 2010. "Latin America: problems and challenges of infrastructure financing," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    6. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 24(1), pages 3-20, Junio.
    7. Walid BENAYED & Foued Badr GABSI & Samia OMRANE BELGUITH, 2015. "Threshold Effect of Public Debt on Domestic Investment: Evidence from Selected African Countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(605), W), pages 189-198, Winter.
    8. Pradyumna Dash, 2016. "The Impact of Public Investment on Private Investment: Evidence from India," Vikalpa: The Journal for Decision Makers, , vol. 41(4), pages 288-307, December.
    9. Dongmin Yao & Yijing Chen & Yixuan Xu, 2021. "How Public Expenditure and Bank Credit Affect Growth: Provincial and Enterprise Level Causal Evidence from China's 2008 Wenchuan Earthquake," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 195-231, May.
    10. Eduardo A. Cavallo & Tomás Serebrisky & Verónica Frisancho & Jonathan Karver & Andrew Powell & Diego Margot & Ancor Suárez-Alemán & Eduardo Fernández-Arias & Matías Marzani & Solange Berstein & Marian, 2016. "Saving for Development: How Latin America and the Caribbean Can Save More and Better," IDB Publications (Books), Inter-American Development Bank, number 94597 edited by Eduardo A. Cavallo & Tomás Serebrisky, February.
    11. Ramón Espinasa, 2008. "Prospects for the Oil-importing Countries of the Caribbean," Research Department Publications 2007, Inter-American Development Bank, Research Department.
    12. Anis Chowdhury, 2012. "Structural Adjustment and Crises –Which Way Now?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(1), pages 85-118, April.
    13. Timilsina,Govinda R. & Sahoo,Pravakar & Dash,Ranjan Kumar, 2022. "Why Do Indian States Differ in Their Infrastructure Development ?," Policy Research Working Paper Series 10086, The World Bank.
    14. Cavallo, Eduardo A. & Serebrisky, Tomás & Frisancho, Verónica & Karver, Jonathan & Powell, Andrew & Margot, Diego & Suárez-Alemán, Ancor & Fernández-Arias, Eduardo & Marzani, Matías & Berstein, Solang, 2016. "Saving for Development: How Latin America and the Caribbean Can Save More and Better," IDB Publications (Books), Inter-American Development Bank, number 7677, November.
    15. Eduardo Lora, 2007. "The Fiscal Vulnerability of Social Public Expenditure: Is Latin America Different?," Research Department Publications 4505, Inter-American Development Bank, Research Department.

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