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Threshold Effects in the Public Capital Productivity: An International Panel Smooth Transition Approach

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  • Gilbert Colletaz

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)

  • Christophe Hurlin

    ()
    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)

Abstract

Using a nonlinear panel data model, we examine the threshold effects in the productivity of the public capital stocks for a panel of 21 OECD countries observed over 1965-2001. Using the so-called "augmented production function" approach, we estimate various specifications of a Panel Smooth Threshold Regression (PSTR) model recently developed by Gonzalez, Teräsvirta and Van Dijk (2004). One of our main results is the existence of strong threshold effects in the relationship between output and private and public inputs: whatever the transition mechanism specified, tests strongly reject the linearity assumption. Moreover, this model allows cross-country heterogeneity and time instability of the productivity without specification of an ex-ante classification over individuals. Consequently, it is possible to give estimates of productivity coefficients for both private and public capital stocks at any time and for all the countries. Finally we proposed estimates of individual time varying elasticities that are much more reasonable than those previously published.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00724208.

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Date of creation: Aug 2008
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Handle: RePEc:hal:wpaper:halshs-00724208

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Related research

Keywords: Public Capital ; Panel Smooth Threshold Regression Models;

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  1. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9215, Faculty of Economics, University of Cambridge.
  2. Baltagi, Badi H & Pinnoi, Nat, 1995. "Public Capital Stock and State Productivity Growth: Further Evidence from an Error Components Model," Empirical Economics, Springer, Springer, vol. 20(2), pages 351-59.
  3. Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers 2/2005, European Investment Bank, Economics Department.
  4. John Fernald, 1997. "Roads to prosperity? assessing the link between public capital and productivity," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 592, Board of Governors of the Federal Reserve System (U.S.).
  5. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 23(2), pages 177-200, March.
  6. 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.
  7. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
  8. Pinnoi, Nat, 1994. "Public infrastructure and private production measuring relative contributions," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 23(2), pages 127-148, March.
  9. Evans, Paul & Karras, Georgios, 1994. "Is government capital productive? Evidence from a panel of seven countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 16(2), pages 271-279.
  10. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers, Department of Economics, Williams College 2000-02, Department of Economics, Williams College.
  11. González, Andrés & Teräsvirta, Timo & van Dijk, Dick, 2005. "Panel Smooth Transition Regression Models," Working Paper Series in Economics and Finance 604, Stockholm School of Economics.
  12. Jansen, Eilev S & Terasvirta, Timo, 1996. "Testing Parameter Constancy and Super Exogeneity in Econometric Equations," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 735-63, November.
  13. van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
  14. Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
  15. Eisner, Robert, 1994. "Real government saving and the future," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 23(2), pages 111-126, March.
  16. Granger, Clive W. J. & Terasvirta, Timo, 1993. "Modelling Non-Linear Economic Relationships," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198773207, October.
  17. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
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