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Assessing the contribution of public capital to private production: Evidence from the German manufacturing sector

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  • Andreas Stephan

Abstract

Using time-series cross-section data from the manufacturing sector of the 11 West German 'Bundeslander' (Federal States) from 1970 to 1996, I examine the impact of public capital on private production. My econometric analysis explicitly takes into account four of the most frequent specification issues in the context of time-series crosssection data analysis: serial correlation, groupwise heteroscedasticity, cross-sectional correlation and non-stationarity of data. For all approaches and tested specifications, I find that public capital is a significant input for production in the manufacturing sector. Moreover, I find that differences in public capital endowment can explain long-term differences in productivity across the Bundeslander. One tentative conclusion that can be drawn from this finding is that differences in public capital endowment might also explain a part of the still-existing productivity gap between manufacturing in East and West Germany. However, I emphasise that the existence of positive effects of public capital on private production is a necessary, but not a sufficient condition for concluding that public investments should be boosted in the future.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0269217032000118747
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 17 (2003)
Issue (Month): 4 ()
Pages: 399-417

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Handle: RePEc:taf:irapec:v:17:y:2003:i:4:p:399-417

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Citations

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Cited by:
  1. Pellervo Hämäläinen & Tuomas Malinen, 2011. "The relationship between regional value-added and public capital in Finland: what do the new panel econometric techniques tell us?," Empirical Economics, Springer, vol. 40(1), pages 237-252, February.
  2. Pellervo Hamalainen, 2009. "Review of literature on the productivity of public capital," Discussion Papers 55, Aboa Centre for Economics.
  3. Fedderke, Johannes W. & Bogetic & Zeljko, 2006. "Infrastructure and growth in South Africa : direct and indirect productivity impacts of 19 infrastructure measures," Policy Research Working Paper Series 3989, The World Bank.
  4. Alfredo Marvão Pereira & Jorge M. Andraz, 2013. "On the economic effects of public infrastructure investment:A survey of the international evidence," Working Papers 108, Department of Economics, College of William and Mary.
  5. Pedro R.D. Bom & Jenny E. Ligthart, 2009. "How Productive is Public Capital? A Meta-Regression Analysis," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0912, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  7. Bertarelli Silvia, 2006. "Capitale pubblico e crescita: una sintesi critica," Politica economica, Società editrice il Mulino, issue 3, pages 361-398.
  8. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "The Macroeconomic Impact of Infrastructures: A Literature Review and Empirical Analysis on the Case of Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.
  9. Emanuela Marrocu & Raffaele Paci, 2010. "The effects of public capital on the productivity of the Italian regions," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 989-1002.
  10. Metin KARADAG, 2010. "The Impact of Public Capital on the Efficiency of Private Manufacturing Industry at the Regional Level," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 10(4), pages 1167-1174.
  11. Jordan Roulleau-Pasdeloup, 2013. "The Productive Government Spending Multiplier, In and Out of The Zero Lower Bound," Working Papers 2013-02, Centre de Recherche en Economie et Statistique.
  12. Hirte, Georg & Stephan, Andreas, 2014. "Regionale Beschäftigungswirkungen von öffentlichen Investitionen in Straßen- und Schieneninfrastruktur," Discussion Papers 2/2014, Dresden University of Technology, Faculty of Transportation and Traffic Sciences "Friedrich List", Institute for Transport and Economics.
  13. Andreas Stephan, 2007. "Zur Politischen Ökonomie öffentlicher Infrastrukturausgaben," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 116-132, 04.
  14. Heinz Handler & Andreas Knabe & Bertrand Koebel & Margit Schratzenstaller & Sven Wehke, 2005. "The Impact of Public Budgets on Overall Productivity Growth," WIFO Working Papers 255, WIFO.
  15. Jürgen Rüttgers & Georg Milbradt & Helmut Seitz & Max Groneck & Wolfgang Kitterer & Markus C. Kerber, 2007. "Überschuldete Bundesländer: Ist die Einführung eindeutiger Verschuldungsgrenzen sinnvoll?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(02), pages 03-19, 01.

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