Is public capital productive in Europe?
AbstractThis paper addresses the issue of whether and by how much public investment or public capital can increase GDP. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A vector autoregressive (VAR) model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a 'golden rule of public finance' in the European Monetary Union is legitimate in this respect.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Review of Applied Economics.
Volume (Year): 22 (2008)
Issue (Month): 6 ()
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Other versions of this item:
- Gwénaëlle Poilon & Jérôme Creel, 2006. "Is Public Capital Productive in Europe?," Sciences Po publications nÂ°2006-10, Sciences Po.
- Jerome Creel & Gwenaëlle Poilon, 2006. "Is public capital productive in Europe?," Documents de Travail de l'OFCE 2006-10, Observatoire Francais des Conjonctures Economiques (OFCE).
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
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