Daniel J. Henderson () (Department of Economics, State University of New York at Binghamton) Subal C. Kumbhakar () (Department of Economics, State University of New York at Binghamton, Binghamton)
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Is public expenditure productive? Is there a shortfall or excess in public capital investment? We address these old issues in the light of new econometric tools. It is argued that the Cobb-Douglas specification that ignores nonlinearity inherent in the functional relationship of the production technology causes incorrect estimates of input elasticities. To avoid possible model misspecification, we use Li-Racine generalized kernel estimation. This procedure is used to estimate the returns to private capital, employment, and public capital in gross state product from a panel of 48 states for 17 years. In contrast to previous studies, we find that the return to public capital is positive and significantly different from zero.
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Volume (Year): 73 (2006) Issue (Month): 1 (July) Pages: 219–232 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics H4 - Public Economics - - Publicly Provided Goods O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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