Discussion Paper Details

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Title: Public investment and regional growth and convergence: Evidence from Greece

Author(s): Yannis Psycharis, Andrés Rodríguez-Pose and Vassilis Tselios

Publication Date: March 2012

Keyword(s): convergence, economic growth, Greece, public investment, regional economics, regional policy, spatial econometrics and spillover effects

Programme Area(s): International Trade and Regional Economics

Abstract: This paper estimates the impact of public investment on regional economic growth and convergence at the NUTS III level in Greece. Using a new database of public expenditure per region for the period 1978-2007, it proposes a model which captures not just the impact of public investment in Greek prefectures, but also the spillover effects related to the existence of externalities from neighbouring regions. The results point to a positive long-run impact of public investment per capita on regional economic growth ? but not on convergence ? which also generates considerable spillover effects. However, the returns vary according to different types of public investment, with education and infrastructure spillovers having the highest impact. In general, public investment externalities seem to be more relevant for regional growth than direct public investment in each region. Finally, the impact of different types of public investment in Greece is mediated by politics and political factors, but the effect of politics disappears once we control for political-period-specific spatial-invariant variables.

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Bibliographic Reference

Psycharis, Y, Rodríguez-Pose, A and Tselios, V. 2012. 'Public investment and regional growth and convergence: Evidence from Greece'. London, Centre for Economic Policy Research.