Crowding in Vs. Crowding Out Effect

What is the ‘Crowding In effect’?

“Crowding in effect” takes place when the government investment attracts or brings in Private investment. It means growing government spending increases demand.

What is the ‘Crowding Out effect’?

The “Crowding Out effect” takes place when the government investment displaces Private investment. It means growing government spending pushes down private sector spending. Following are the main reasons behind the crowding-out effect to take place:

  1. Social welfare
  2. Economics,
  3. Infrastructure.  

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