Multi-sectoral interdependencies of regional public infrastructure investments

• Knowledge of public investment interdependencies can support policy objectives.
• A dynamic model is used to identify multi-sectoral investment interaction in Greece.
• Public investment allocation is a multi-criteria and highly competitive process.
• There are only few complementarities among productive infrastructure investments.
• Budget constraint into specific sectors can prevent unintended fiscal spillovers.

Public investment decision-making processes involve multiple and interrelated sectoral and regional policy objectives and budget constraints. This paper presents a dynamic spatio-economic model that considers multi-sectoral investment interdependencies using data at the prefecture level in Greece. The expenditure allocation dynamics of most types of regional public investment are found to be competitive with each other. This outcome is attributed to the lack of policy coordination, technological and budget constraints, geographical factors, and equity and political considerations. The investment interrelationships may have a significant effect on future state funding needs and the strategic assessment of infrastructure development at the country level.