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Public infrastructure investments, productivity and welfare in fixed geographic areas

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Author Info
Andrew F. Haughwout

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Abstract

Measures of the value of public investments are critical inputs into the policy process, and aggregate production and cost functions have become the dominant methods of evaluating these benefits. This paper examines the limitations of these approaches in light of applied production and spatial equilibrium theories. A spatial general equilibrium model of an economy with nontraded, localized public goods like infrastructure is proposed, and a method for identifying the role of public capital in firm production and household preferences is derived. Empirical evidence from a sample of large U.S. cities suggests that while public capital provides significant productivity and consumption benefits, an ambitious program of locally funded infrastructure provision would likely generate negative net benefits for these cities.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 104.

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Date of creation: 2000
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Handle: RePEc:fip:fednsr:104

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Keywords: Infrastructure (Economics) ; Finance; Public ; Local finance ; Capital investments;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March. [Downloadable!] (restricted)
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  2. 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. [Downloadable!] (restricted)
  3. Brueckner, Jan K., 1983. "Property value maximization and public sector efficiency," Journal of Urban Economics, Elsevier, vol. 14(1), pages 1-15, July. [Downloadable!] (restricted)
  4. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-80, February. [Downloadable!] (restricted)
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  5. Ernst R. Berndt & Bengt Hansson, 1991. "Measuring the Contribution of Public Infrastructure Capital in Sweden," NBER Working Papers 3842, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
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  7. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August. [Downloadable!] (restricted)
  8. Haughwout, Andrew F., 1998. "Aggregate Production Functions, Interregional Equilibrium, and the Measurement of Infrastructure Productivity," Journal of Urban Economics, Elsevier, vol. 44(2), pages 216-227, September. [Downloadable!] (restricted)
  9. Alicia H. Munnell, 1991. "Is there a shortfall in public capital investment? An overview," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 23-35.
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  10. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March. [Downloadable!] (restricted)
  11. Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March. [Downloadable!] (restricted)
  12. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December. [Downloadable!] (restricted)
  13. Randall W. Eberts, 1990. "Cross-sectional analysis of public infrastructure and regional productivity growth," Working Paper 9004, Federal Reserve Bank of Cleveland. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jason Timmins, 2005. "Is Infrastructure Productive? Evaluating the effects of specific infrastructure projects on firm productivity within New Zealand," Working Papers 05_14, Motu Economic and Public Policy Research. [Downloadable!]
  2. Kovacs, Kent, 2005. "Amount and Spatial Distribution of Public Open Space to Maximize the Net Benefits from Urban Recreation," 2005 Annual meeting, July 24-27, Providence, RI 19206, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. Gilles Duranton & Matthew A. Turner, 2007. "Urban growth and transportation," Working Papers tecipa-305, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  4. Luis Otavio Reiff & Ana Luiza Barbosa, 2005. "Housing stock in Brazil: estimation based on a hedonic price model," BIS Papers chapters, in: Bank for International Settlements (ed.), Real estate indicators and financial stability, volume 21, pages 257-270 Bank for International Settlements. [Downloadable!]
  5. Stephen P. A. Brown & Kathy J. Hayes & Lori L. Taylor, 2002. "State and local policy, factor markets and regional growth," Working Papers 02 02, Federal Reserve Bank of Dallas. [Downloadable!]
  6. Joseph Berechman & Dilruba Ozmen & Kaan Ozbay, 2006. "Empirical analysis of transportation investment and economic development at state, county and municipality levels," Transportation, Springer, vol. 33(6), pages 537-551, November. [Downloadable!] (restricted)
  7. Jorge Soares, Marina Azzimonti, Pierre-Daniel Sarte & Pierre-Daniel Sarte & Jorge Soares, 2006. "Distortionary Taxes and Public Investment When Government Promises Are Not Enforceable," Working Papers 06-07, University of Delaware, Department of Economics. [Downloadable!]
    Other versions:
  8. Andrew F. Haughwout & Robert P. Inman, 2004. "How should suburbs help their central cities?," Staff Reports 186, Federal Reserve Bank of New York. [Downloadable!]
  9. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Michael F. Williams, 2005. "Can State Governments Redistribute Income? Using Source-Based Capital Taxes For Income Redistribution," The International Journal of Applied Economics, Department of General Business, Southeastern Louisiana University, vol. 2(1), pages 62-78, March. [Downloadable!]
  11. Anna Rubinchik-Pessach, 2004. "An Inquiry into the Efficiency of Water Projects Under WRDA'86," Asia-Pacific Financial Markets, Springer, vol. 11(6), pages 741-762, November. [Downloadable!] (restricted)
    Other versions:
  12. Nicolaas Groenewold & Alfred Hagger, 2007. "The effects of fiscal equalisation in a model with endogenous regional governments: an analysis in a two-region numerical model," The Annals of Regional Science, Springer, vol. 41(2), pages 353-374, June. [Downloadable!] (restricted)
  13. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 2004. "Contribution to Productivity or Pork Barrel?: The Two Faces of Infrastructure Investment," Discussion Papers of DIW Berlin 458, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  14. Philip Mccann, 2006. "On the supply-side determinants of regional growth," Construction Management & Economics, Taylor and Francis Journals, vol. 24(7), pages 681-693, July. [Downloadable!] (restricted)
  15. Alfredo M. Pereira & Jorge M. Andraz, 2008. "On the Regional Incidence of Public Investment in Highways in the USA," Working Papers 70, Department of Economics, College of William and Mary. [Downloadable!]
  16. Richard Deitz & Jaison R. Abel, 2008. "Have amenities become relatively more important than firm productivity advantages in metropolitan areas?," Staff Reports 344, Federal Reserve Bank of New York. [Downloadable!]
  17. Sharada Vadali, 2008. "Toll roads and economic development: exploring effects on property values," The Annals of Regional Science, Springer, vol. 42(3), pages 591-620, September. [Downloadable!] (restricted)
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