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How Plausible the Predicted Superiority of Private Over Public Investment Still Stands, If Ever?

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  • Benjamin García Páez

Abstract

This essay aims to test the hypothesis held by the Theory of Financial Liberalisation in the sense that financial resources diverted by non-market forces are inefficiently allocated, ergo, public investment is less productive than private investment. The relationship between public and private investment and the productivity in both the public and the private sectors are then analysed in search of empirical evidence to discern the endurance of such hypothesis throughout the changing evolution of the Mexican financial system since 1970 up to 2019. The paper is arranged in four sections. Firstly, some historical financial liberalisation events are put forward. Secondly, theoretical issues concerning the concept of productivity of the two types of investment are discussed. It also reviews empirical work done on the productivity in less-developed countries. Thirdly, an attempt to measure productivity of both public and private investment in Mexico is made. It then describes the methodology and the estimation results obtained for Mexico are launched. Finally, main conclusions are delivered.

Suggested Citation

  • Benjamin García Páez, 2021. "How Plausible the Predicted Superiority of Private Over Public Investment Still Stands, If Ever?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(10), pages 1-87, September.
    • Handle: RePEc:ibn:ijefaa:v:13:y:2021:i:10:p:87
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    References listed on IDEAS

    as
    1. Balassa, Bela, 1989. "Financial liberalization in developing countries," Policy Research Working Paper Series 55, The World Bank.
    2. Collier, Paul & Mayer, Colin, 1989. "Financial Liberalization, Financial Systems, and Economic Growth: The Assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 5(4), pages 1-12, Winter.
    3. Tanzi, Vito, 1976. "Fiscal policy, Keynesian economics and the mobilization of savings in developing countries," World Development, Elsevier, vol. 4(10-11), pages 907-917.
    4. Balassa, Bela, 1989. "The effects of interest rates on savings in developing countries," Policy Research Working Paper Series 56, The World Bank.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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