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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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Comparative overview

challenges and lessons

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, in particular to bridge the policy and financial gaps across levels of government, facilitate public-private co-operation and enhance transparency and accountability in the use of funding at all levels. Part I of the report highlights good practices and lessons learned, focusing more extensively on country examples developed in the second part of the report, i.e. Australia, Canada, France, Germany, Korea, Spain, Sweden and the United States. As stimulus packages are phased out, many countries have moved toward fiscal consolidation and public investment is particularly targeted as an adjustment variable. Just as co-ordination between levels of government was important to implement recovery measures, multi-level governance arrangements and place-based approaches are necessary to better prioritise reduced public investment and make the most of it.

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