Page 126 - Azerbaijan State University of Economics

THE PUBLIC INVESTMENTS IN AZERBAIJAN: THEORETICAL AND PRACTICAL ASPECTS

capital. These factors in their turn increase the investment activity and

create appropriate opportunities.
In general, government investments affect the economic development

in the following was [Pietro Toigo and Robert Woods, 2006: 66]:
- Constitute an intermediate input to private sector production that

helps lower costs – partly through the effect on transaction costs,

increased access to markets and market information and improved
competitiveness in import/export markets;

- Raise the productivity of other factors (labor and other capital) by
allowing use of complementary technologies and improving access and

information flows, as well as may induce crowding-in of additional

private resources;
- Have a structural impact on demand and supply; for example,

public infrastructure contributes to the diversification of an economy
(especially for open source technology such as communications, which

allows the application of modern technologies to a wide range of sectors).
D. Sutherland and others consider that infrastructure can have

additional effects through a number of different channels, such as by

facilitating the division of labor, competition in markets, the diffusion of
technology and the adoption of new organizational practices or through

providing access to larger markets, new resources and intermediate
products [Sutherland et al, 2009:13].

The researches of American economist David Alan Aschauer showed
that reduction of the productivity after 1970 during subsequent 20 years is

explained by the reduction of public investments [Aschauer, 1990]. At the

same time the importance of the public investments is explained by inability
or limitations of the private sector to invest into development of the some

126