EIB Papers Volume 13. n°1/2008 - European Investment Bank

34 Volume13 N°1 2008 EIB PAPERS
Box 3. Government investment in “Economic Affairs” in the EU, Japan and the
United States
The classification of government expenditure by functions (COFOG) in the European System
of Accounts (1995) discussed in Section 2 is based on the United Nations’ System of National
Accounts (1993); consequently, a similar breakdown as presented for European countries is
also used in countries outside Europe. That allows us to compare the level and evolution of
government investment in “Economic Affairs” (infrastructure for short) in Europe with Japan
and the United States.
The Figure B2 shows that the current level of government infrastructure investment is lowest
in EU-15 at about 0.8 percent of GDP, a third of the level in Japan. In the United States the
government sector invests some 1 percent of GDP in infrastructure, while in the new member
states of the EU the figure is 1.5 percent of GDP.
As mentioned in the main text, some of the cross-country differences reflect simply different
institutional set-ups for providing infrastructure services. In addition, it is important not to
confuse quantity with quality: These figures tell us something about the relative size of annual
investment flows from public sources, but how productive that investment is is an altogether
different matter.
Further on Figure B2, we see that government infrastructure investment has remained
remarkably stable over the past decade or so in EU-15 and the United States, while there has
been a marked downtrend in Japan, related to the winding down of the drawn-out fiscal
stimulus of the 1990s. In the NMS, government infrastructure investment was on a downtrend
until a few years ago, halving in magnitude relative to GDP. However, the past few years have
seen a reversal of that downtrend.
Figure B2. Government investment in “Economic Affairs”
(in percent of GDP; GDP-weighted average for EU-15 and NMS)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
US
Source: Eurostat, OECD, own calculations
EU-15 NMS Japan