Darden: Crowded Out? Government Spending and the Private Sector

By SIMON CONSTABLE

Does government spending pull resources away from the private sector?

It’s a question that has long vexed economists. 

One widely held theory, the crowding-out effect, asserts that yes, government spending eats up resources that otherwise would be available for businesses.

However, new research shows that crowding out doesn’t necessarily happen, as long as the economy isn’t running at full capacity, producing to its full potential. Read more here.

Photo by Elton Sa on Unsplash