Government public infrastructure investment and economic performance in Spain (1980-2016)

Abstract

We estimate the multiplier effect of government public infrastructure investment (INFINV) in Spain. To this aim, we employ annual data of the seventeen Spanish regions (autonomous communities) between 1980 and 2016, and apply dynamic acyclic graphs and heterogeneous panel structural VARs. Our findings suggest that an increase in the level of INFINV generates a positive and persistent effect on the level of output. Five years after the fiscal expansion, the multiplier effects of INFINV reach values above one. This confirms that INFINV expansions have Keynesian effects. We also find that the fiscal multiplier effects differ between above-average- and below-average-GDP per capita regions.