The Impact of Public Investments on Macroeconomic Indicators

Abstract

Public services and investments have been dealt with and addressed in many political and economic debates lately. In doing so, making this indicator a part and cause of many analyzes, whether for developed or developing countries. Different types of methodologies have been used for this purpose, but the real impact of road infrastructure on economic growth remains uncertain. The assumptions cast on this fact are divided in two directions. One is that road infrastructure affects directly, while the other is that it follows a backward path and the impact is small. Literature is what argues the theses outlined above. The selection of literature is based on neoclassical school considering the investment in road infrastructure as a production factor. The empirical results show that the impact on revenue growth was minimal. This may be due to factors such as inefficiency, low productivity of infrastructure investments, and low growth capacity of Albania or developing countries to support high-end investments. Another obstacle for Albania and developing countries is the limited fiscal space and lack of capacity to cover the debts used for road investments.