Regional Public Stock Reductions in Spain: Estimations from a Multiregional Spatial Vector Autorregressive Model

Abstract

Abstract. The estimation of the impact of public investment on regional economic growth requires consideration of the spatio-temporal dynamics among the state variables of each region. According to recent data, public investment in Spain has fallen in recent years, and in some regions the reduction has been so severe that public investment has not been able to replenish depreciated capital. Recent austerity policies in Spain that feature temporary decreases in the accumulation of regional public capital should thus be evaluated in terms of their impact on the economy as a whole and on specific regions together with the spillover effects from one region to the rest of the regional system. This paper uses a multiregional integrated specification to model interdependencies across regions; our results indicate that while global decreases in public investment have a homogeneously negative effect on the output of all Spanish regions, these regions portray heterogeneous responses from localized public capital stock reductions over the simulation period considered.

fiscal capacity of local government versus government expenditure, and its impact on eliminating interregional social inequalities in Poland

“…Especially if the overall context of the socio-economic development of the region is not taken into account, for example, through the complex indicator of the supported development sectors (Mohiuddin, Hashia 2012). National governments need to consider how best to rationalize public investment, and new tools are necessary to guide and prioritize these investments (Márquez et al 2017). Hence, the government administration's broader engagement in the sphere of regional development may result in an inecient spending of the limited resources of public funds, the growth of bureaucracy supervising this activity, the consolidation of ineective institutional structures, the introduction of regulations inhibiting entrepreneurship, and the development of bottomup mobilisation of endogenous potentials.…”