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Making the Most of Public Investment in a Tight Fiscal Environment

Multi-level Governance Lessons from the Crisis

image of Making the Most of Public Investment in a Tight Fiscal Environment

How to make the most of public investment? This question is critical in today’s tight fiscal environment. Given that sub-national governments in OECD countries carry out more than two thirds of total capital investment, they have played a key role in executing national stimulus packages during the global crisis. The effectiveness of recovery strategies based on public investment thus depends largely on the arrangements between levels of government to design and implement the investment mix.  This report provides an overview of challenges met in the recovery and highlights good practices and lessons learned, focusing on eight country cases: Australia, Canada, France, Germany, Korea, Spain, Sweden and the United States. As stimulus packages are being phased out since 2010, many countries have moved toward fiscal consolidation and targeted public investment as an adjustment variable. Co-ordination between levels of government was essential to implement recovery measures, and it is equally important to better prioritise reduced public investment and make the most of it for sustainable growth.

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Acknowledgements

The OECD Secretariat is particularly grateful to the Korea Institute of Public Finance (KIPF) for its support of the research that provided critical input to this report, in particular to Mr. Junghun Kim, Director of Fiscal Research, and Chair of the OECD Network on Fiscal Relations across Levels of Government. The OECD is also grateful to the delegates of the Territorial Development Policy Committee (TDPC) for their rigorous feedback on the initial drafts. The draft report was discussed at the TDPC Committee meeting in December 2010. Updates and fact checks by national delegations were received in the first quarter of 2011.

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