The depletion effect (English crowding out effect) is a central term of the VWL. It designates the displacement of private-economical activity by the state.

Depletion effects on the financial market

This depletion effect describes the displacement more privately by national investments.

The connection is characterized by the fact that in a national economy with rising public expenditures on the one hand the gross national income rises, and with it accompanying also increases the demand for money. The demand for money curve is shifted thus to the right in offer demand a diagram. Due to the steep process of the money offer curve (small interest elasticity of the money offer) thus already small increases of the demand for money lead to a superproportionally large increase of the interest. This interest rise again does not have acceptable Zinsniveau the consequence to transact that private enterprises, which would like themselves to be to blame for on the capital market in order investments, now one for it any longer is faced with. The private enterprises are thus out-pushed from the capital market. They cannot afford it now any longer money entleihen, in order to transact the intended investment.

The interest rise must lead thus in the long run to declining private-economical investments.

As strongly the decrease of the investments precipitates, depends on the interest elasticity of the investment demand. There in the monetarism, contrary to the theory after Keynes, a large interest elasticity of the investment demand is subordinated, affects themselves an interest rise here particularly negatively. The investment decrease will thus fail in the monetaristischen theory particularly strongly.

The aforementioned connection is the central argument, with which from view of the monetarism the fiscal policy is to be rejected as influence instrument.

The effect must be regarded however also critically. The neoclassical savings function assumes with rising interest more is saved. If like that is, the quantity of the money of the capital market rises collectively seen, the interest sinks again and oscillates themselves then on a middle level.

Depletion effects on the job market

National acting provides in opinion of liberal economist also on the job market for a displacement of private-economical acting. Thus the supply of nationally financed jobs (for example over work-providing measures or in euro-jobs) leads to a proportionate decrease on jobs in the free economy. In order to avoid depletion effects, such national subsidies are disbursed often only for such jobs, for which outs exist no danger of such Crowding.

Articles in category "Depletion effect"

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