Fiscal Multipliers: Empirical Evidence for a Cost-Effective Allocation of Public Investment

This research provides empirical evidence on the multiplier effects of various types of public investment, offering insights to optimize the allocation of public investment resources from a cost-effectiveness perspective. The results indicate that the most cost-effective public investments are in sectors such as basic sanitation, hydrocarbons, urban planning, health, and agriculture. Furthermore, since public investment is predominantly focused on construction projects, the findings suggest prioritizing building construction (e.g., schools, hospitals) over civil works (e.g., roads, bridges), as the former demonstrates a higher multiplier effect. The analysis also identifies sectors where the multiplier effect of public investment is amplified by the target economic activity, highlighting health, education, and agriculture. Moreover, improving project design in sectors like food and miscellaneous manufacturing, hotels and restaurants, building construction, and certain services could enhance economic and employment impacts.