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Abstract

We present an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors' productivity. Based on a simple stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data, we show that the production function approach may not be reliable to estimate this contribution. Our analysis reveals that this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs.

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File URL: http://halshs.archives-ouvertes.fr/docs/00/78/92/80/PDF/full_revision_december_for_SHS.pdf
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Paper provided by HAL in its series Working Papers with number halshs-00773200.

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Date of creation: 2012
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Handle: RePEc:hal:wpaper:halshs-00773200

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Keywords: Robustness and sensitivity analysis ; DSGE ; Time series; Infrastructure ; Public capital elasticity ; Cointegrated regressors;

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1. 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.
   
   • Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers 2/2005, European Investment Bank, Economics Department.
2. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S151-68, Supplemen.
3. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
   
   • David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
4. Soderlind, Paul & Vredin, Anders, 1996. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 363-81, July-Aug..
   
   • Söderlind, Paul & Vredin, Anders, 1994. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," Working Paper Series in Economics and Finance 30, Stockholm School of Economics.
   • Söderlind, Paul & Vredin, Anders, 1995. "Applied Cointegration Analysis in the Mirror of Macroeconomic Theory," CEPR Discussion Papers 1120, C.E.P.R. Discussion Papers.
   • Soderlind, P. & Vredin, A., 1994. "Applied Conintegration Analysis in the Mirror of Macroeconomic Theory," Papers 584, Stockholm - International Economic Studies.
5. Cassou, Steven P. & Lansing, Kevin J., 1998. "Optimal fiscal policy, public capital, and the productivity slowdown," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 911-935, June.
   
   • Steven P. Cassou & Kevin J. Lansing, 1995. "Optimal fiscal policy, public capital, and the productivity slowdown," Working Paper 9509, Federal Reserve Bank of Cleveland.
6. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
7. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
8. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
9. Bajo-Rubio, Oscar & Sosvilla-Rivero, Simon, 1993. "Does public capital affect private sector performance? : An analysis of the Spanish case, 1964-1988," Economic Modelling, Elsevier, vol. 10(3), pages 179-185, July.
10. Ratner, Jonathan B., 1983. "Government capital and the production function for U.S. private output," Economics Letters, Elsevier, vol. 13(2-3), pages 213-217.
11. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
12. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
    
    • Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
    • Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
    • Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
13. Peter J. Wylie, 1996. "Infrastructure and Canadian Economic Growth 1946-1991," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 350-55, April.
14. Eisner, Robert, 1994. "Real government saving and the future," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 111-126, March.
15. William Crowder & Daniel Himarios, 1997. "Balanced growth and public capital: an empirical analysis," Applied Economics, Taylor and Francis Journals, vol. 29(8), pages 1045-1053.
16. Ram, Rati & Ramsey, David D., 1989. "Government capital and private output in the United States : Additional evidence," Economics Letters, Elsevier, vol. 30(3), pages 223-226, September.

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