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Public Infrastructure and Economic Growth: Time‐Series Properties and Evidence

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  • SAU‐HIM PAUL LAU
  • CHOR‐YIU SIN

Abstract

We examine whether economic growth is generated endoge‐nously or exogenously, and estimate the externality effects due to private and public capital respectively. Applying a multivariate stochastic coinlegration method to US data, we find that the evidence is unfavourable to the endogenous growth model with public infrastructure. The estimated elasticity of output with respect to public capital is 0.11, smaller than typical values obtained in single‐equation regression studies. On the other hand, if the share of capital income is taken to be one‐third, then the spillover effect due to private capital is positive but may be as low as 0.10.

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  • Sau‐Him Paul Lau & Chor‐Yiu Sin, 1997. "Public Infrastructure and Economic Growth: Time‐Series Properties and Evidence," The Economic Record, The Economic Society of Australia, vol. 73(221), pages 125-135, June.
    • Handle: RePEc:bla:ecorec:v:73:y:1997:i:221:p:125-135
    DOI: 10.1111/j.1475-4932.1997.tb00986.x
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