Government Public Investment Dynamic Multiplier Effects: An Empirical Analysis for Spain

We estimate the dynamic multiplier effect of public investment in Spain. To this aim, we employ annual data of the seventeen Spanish Autonomous Communities for the 1980-2016 period. We disaggregate public investment in productive infrastructure investment, INFINV, and in social investment, SOCINV. Thus, we analyze the dynamic multiplier effect of INFINV and that of SOCINV. Our findings suggest that an increase in the level of public investment generates a positive and permanent effect on the level of GDP. One year after the fiscal expansion, the dynamic fiscal multipliers of INFINV and SOCINV reach values above one, thereby confirming that government public investment expansions have Keynesian effects on the level of output. We also find that the value of the dynamic multipliers is asymmetric when we consider above-average-GDPpc and below-average-GDPpc Autonomous Communities.