Potencial de Mercado, Economía Geográfica e Inversión Privada en Ecuador

There is a growing and extensiveliterature thatexplains Market potential, geographic economy and private investment. Within the geographical economy there are elementssuch as the location of production and the geographical structure that determine whether they are more attractive for private investment or not, due to the levels of market access they offer and that can be captured through the geographic economy variable called market potential. Based on these considerations, this paper focuses on the empirical analysis of the role played by market potential and geographic economy in the levels of private investment in the Ecuadorian provinces during the period 2007-2014. In addition, we will control for other relevant variables when analyzing the levels of private investment (Public investment, income tax, consumption tax and migrant remittances). The results of our estimates show that market potential plays an important role in explaining levels of private investment. The positive role of the market potential is confirmedwhen determiningthe levels of private investment in the Ecuadorian provinces; that public spending has a crowdingout effect on private investment; Remittances have a positive impact on private investment levels; and direct taxes (income) have a negative effect on private investment while indirect taxes (VAT) have a positive effect.