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This paper asks whether government investment “crowds out” or “crowds in” private investment in China. We divide government capital expenditures into two types: (1) investment that serves to provide public goods and infrastructure, and (2) investment in private industry and commerce. The results of structured vector auto-regressive analysis suggest that government investment in public goods in China “crowds in” private investment significantly, while government investment in private goods, industry and commerce, mainly through state-owned enterprises, “crowds out” private investment significantly.
Xiao-ming et al. (Thu,) studied this question.