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Diagnosing the Productivity Effect of Public Capital in the Private Sector

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  • Chu-Ping C. Vijverberg

    (Wichita State University)

  • Wim P. M. Vijverberg

    ()
    (University of Texas at Dallas)

Abstract

Does public capital contribute to the productivity in the private sector? If so, which part of the private sector benefits most? Is public capital a substitute for or a complement of labor and private capital? This paper addresses these questions with both cost and profit function models estimated on U.S. time series data of the private sector and two of its subsectors. It pays special attention to nonstationarity in the data, to endogeneity in the price variables, and to the statistical and economic significance of the public capital effect.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume33/V33N2P207_230.pdf
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Bibliographic Info

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

Volume (Year): 33 (2007)
Issue (Month): 2 (Spring)
Pages: 207-230

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Handle: RePEc:eej:eeconj:v:33:y:2007:i:2:p:207-230

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References

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  1. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  2. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
  3. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
  4. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  5. Lynde, Catherine & Richmond, James, 1992. "The Role of Public Capital in Production," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 37-44, February.
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  7. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
  8. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
  9. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  10. Ratner, Jonathan B., 1983. "Government capital and the production function for U.S. private output," Economics Letters, Elsevier, vol. 13(2-3), pages 213-217.
  11. Jan Egbert Sturm & Jakob de Haan,, 1994. "Is public expenditure really productive? New evidence for the US and the Netherlands," Working Papers 20, Centre for Economic Research, University of Groningen and University of Twente.
  12. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
  13. Shunji Oniki, 2000. "Testing the Induced Innovation Hypothesis in a Cointegrating Regression Model," The Japanese Economic Review, Japanese Economic Association, vol. 51(4), pages 544-554, December.
  14. Wim P. M. Vijverberg & Chu-Ping C. Vijverberg & Janet L. Gamble, 1997. "Public Capital And Private Productivity," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 267-278, May.
  15. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  16. Demetriades, Panicos O & Mamuneas, Theofanis P, 2000. "Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economics," Economic Journal, Royal Economic Society, vol. 110(465), pages 687-712, July.
  17. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  18. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-57, Sept.-Nov.
  19. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  20. Nigel Spence & Antonis Rovolis, 2002. "Duality theory and cost function analysis in a regional context: the impact of public infrastructure capital in the Greek regions," The Annals of Regional Science, Springer, vol. 36(1), pages 55-78.
  21. Ram, Rati & Ramsey, David D., 1989. "Government capital and private output in the United States : Additional evidence," Economics Letters, Elsevier, vol. 30(3), pages 223-226, September.
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Cited by:
  1. Fu, Feng-Cheng & Vijverberg, Chu-Ping C. & Vijverberg, Wim P., 2004. "Public Infrastructure as a Determinant of Intertemporal and Interregional Productive Performance in China," IZA Discussion Papers 1019, Institute for the Study of Labor (IZA).
  2. Wim Vijverberg & Feng-Cheng Fu & Chu-Ping Vijverberg, 2011. "Public infrastructure as a determinant of productive performance in China," Journal of Productivity Analysis, Springer, vol. 36(1), pages 91-111, August.

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