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Public Capital and Economic Performance: Evidence from Italy

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Author Info

  • Federico Bonaglia

    (OECD)

  • Eliana La Ferrara

    ()
    (Bocconi University and IGIER)

  • Massimiliano Marcellino

    (Bocconi University, IGIER and EUI)

Abstract

This paper addresses the issue of whether and by how much public capital can enhance economic performance. We apply different methodologies to Italian regional data for the period 1970-1994. The results are presented for Italy as a whole, for different macroregions, and for individual categories of public capital. For the Center and the South, the methodologies employed indicate a positive contribution of infrastructure investment to TFP growth, output, and cost reduction. However, the magnitude of the cost reducing effect does not seem large enough to outweigh the social user cost of public capital. Also, we get mixed results on which types of infrastructure are most effective. Overall, investment in transportation appears to be the most productive: railways in the North and roads in the Center and South are the categories that mostly contributed to TFP growth.

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Bibliographic Info

Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 59 (2000)
Issue (Month): 2 (September)
Pages: 221-244

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Handle: RePEc:gde:journl:gde_v59_n2_p221-244

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Related research

Keywords: public capital; infrastructure; TFP;

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References

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  1. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  2. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  3. Eliana La Ferrara & Massimiliano Marcellino, . "TFP, Costs, and Public Infrastructure: An Equivocal Relationship," Working Papers 176, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "State Infrastructure and Productive Performance," American Economic Review, American Economic Association, vol. 86(5), pages 1095-1111, December.
  5. 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.
  6. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  7. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  8. Alfredo Del Monte & Antonio Acconcia, 2000. "Regional Development and Public Spending: The Case of Italy," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2000(72).
  9. Lucio Picci, 1995. "Productivity and Infrastructure in the Italian Regions," Working Papers 230, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. King, M A, 1972. "Corporate Taxation and Dividend Behaviour: A further Comment," Review of Economic Studies, Wiley Blackwell, vol. 39(2), pages 231-34, April.
  11. Lucio Picci, 1995. "Il 'Capitale mancante' nel Mezzogiorno italiano," Working Papers 212, Dipartimento Scienze Economiche, Universita' di Bologna.
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