Study of Crowding-out and Crowding-in Effect of Public Investment Versus Private Investment

By using economic growth theory and neoclassical methods,this paper analyzes the mechanism of substitution and compensation of public investment with respect to private investment both from the short run/long run,macroeconomic/microeconomic angle of view.On the one hand,public capital and private capital can substitute each other the private production function,and increasing public investment can crowd out private investment equally;on the other hand,public capital has positive externality,which can enhance productivity of private production factors,consequently crowds in private investment.Empirically test shows public investment has both crowding-out and crowding-in effects.With respect to private investment,the latter comes to dominate.The government should strengthen guide and regulation for private investment setting down public investment policies,which lead private investment to form rational expectation and invest more efficient fields.