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The Economic Impact of Public Capital: Evidence from Chinese Prefectures and Firms

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  • Zhang, Jing
  • Yan, Wei

Abstract

This study estimates the economic impact of public capital by constructing the public capital stock of 214 prefectures in China from 1999 to 2006 and combining the data of both prefectural economies and manufacturing firms. Using an instrumental variable estimation strategy, the empirical results show that public capital increases aggregate output in the economy, specifically in the secondary and tertiary sectors. Such growth mainly comes from the increased labor supply and reduced labor costs and, hence, more firms emerge.

Suggested Citation

  • Zhang, Jing & Yan, Wei, 2022. "The Economic Impact of Public Capital: Evidence from Chinese Prefectures and Firms," Regional Science and Urban Economics, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:regeco:v:97:y:2022:i:c:s0166046222000588
    DOI: 10.1016/j.regsciurbeco.2022.103818
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    1. Mona Foertsch & Felix Roesel, 2023. "Public Infrastructure and Regional Resilience: Evidence from the 1918 Spanish Flu in Germany," CESifo Working Paper Series 10705, CESifo.

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    More about this item

    Keywords

    Public capital; Economic development; Labor migration;
    All these keywords.

    JEL classification:

    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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