An empirical analysis on the determinants of the public investments

The share of public investments in the gross domestic product across the EU has been in a down trend since 1970s. Although there were occasional recoveries in this trend, public investments were never at their previous levels. The situation related to public investments gives rise to the formation of many economic problems all across Europe such as slow growth, decrease in employment rates and decline in total productivity. Public investments should be increased after determining the reasons that cause public investments to remain at such low levels and taking necessary measures. Public investments are under the influence of many factors including economic, fiscal, political, demographic, institutional and global. However, financial and institutional factors may affect public investment much more than other factors. Therefore, in this study, the impact of state fragility, political corruption and threshold effect of public debt on public investments were investigated between 1996-2018 for 22 countries of the EU. According to the findings of this study, state fragility and threshold effect create a negative and statistically significant effect on public investments. On the other hand, political corruption has a positive and statistically significant effect on public investments.