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Aggregate Production Functions and the Measurement of Infrastructure Productivity: A Reassessment

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  • Jesus Felipe

    ()
    (Georgia Institute of Technology)

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    Abstract

    This paper revisits the conundrum surrounding the measurement of the impact of public infrastructure spending in the light of the aggregation literature (Fisher, 1969; 1993). It shows why estimations of aggregate production functions (APFs) augmented with a proxy for public expenditures do not yield an estimate that can be interpreted as the productivity of public infrastructure. The reason is that underlying all APFs is the accounting identity that relates value added to the wage bill plus overall profits. This identity can be rewritten as a mathematical form that resembles a production function. Therefore, the estimated coefficients cannot be taken to be the structural parameters of a production function. The paper also offers a brief discussion of the productivity puzzle.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume27/V27N3P323_344.pdf
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    Bibliographic Info

    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 27 (2001)
    Issue (Month): 3 (Summer)
    Pages: 323-344

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    Handle: RePEc:eej:eeconj:v:27:y:2001:i:3:p:323-344

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    Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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    Web page: http://www.ramapo.edu/eea/journal.html
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    Related research

    Keywords: Aggregate Production Functions; Expenditure; Infrastructure; Production Function; Production; Public Expenditure;

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    Cited by:
    1. Felipe, J., 2003. "Sustainable development: a comment," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 21, pages 575-581, December.

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