Examining Forward and Backward Linkages between Public and Private Investments

Proper working of forward and backward linkages between the public and private investments in the face of balanced development of an economy is an already established fact in the literature of development economics.The present article is aimed at examining the working of these two linkage effects upon the economies of 24 countries in different economic status: whether public capital is more productive than private capital and finally to test whether public investments crowd-in or crowd-out the private investments for the period 1988–2013. The results show that, for the entire period, forward linkage has worked for Spain, Senegal and Ecuador and backward linkages worked for United States of America, United Kingdom, Thailand, South Africa, Nigeria, Cambodia, Rwanda and Paraguay. Both forward and backward linkages have happened for Ireland, China, India, Brazil and Peru. For the second objective, the numbers of instances of the income-generative capacities of both types of investments are a few in the entire as well pre-crisis phases unlike that of the post-crisis phase. And the results of the third objective show that there are the maximum instances in favour of crowding-in effects from either private to public or from public to private in all the time phases and a few instances in crowding-out effects.JEL: O18, H54, E22, E01