Crowding in investment in India
…if per capita developmental expenditure rises by 1%, investment can go up by 0.37 to 0.63%
From Mitra and Ural’s excellent paper Indian Manufacturing: A Slow Sector in a Rapidly Growing Economy. They look at the impact of reducing protection, inflexible labour markets and state developmental expenditure on things like productivity, employment and investment. It also contains the line:
Investment is about 40 to 80% higher in a flexible labour market state as compared to a similar state with a rigid labour market.
*expenditure by state governments on health, education, infrastructure etc