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TFP, Costs, and Public Infrastructure: An Equivocal Relationship

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  • Eliana La Ferrara
  • Massimiliano Marcellino

Abstract

This paper studies the impact of public infrastructure on economic perfor-mance. We employ three different methodologies to estimate the returns to public investment. First, we relate growth in total factor productivity to accumulation of public capital. Second, we assess the role of public capital as an input to production. Third, we evaluate the reduction in costs that can be attributed to the presence of public infrastructure. Using regional data for Italy, we find that the aggregate impact of public capital is positive and significant under the first approach, slightly negative under the second, and virtually zero under the third. More coherent results obtain when disaggregating by geographical area and time period: under all three approaches, the effectiveness of public investment seems to be increasing over time and to be higher in Central and Southern regions than in Northern ones.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 176.

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Handle: RePEc:igi:igierp:176

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  1. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
  2. King, M A, 1972. "Corporate Taxation and Dividend Behaviour: A further Comment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 39(2), pages 231-34, April.
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  4. Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "Public Infrastructure, Private Input Demand, and Economic Performance in New England Manufacturing," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 14(1), pages 91-101, January.
  5. Alicia H. Munnell & Leah M. Cook, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
  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. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  8. Federico Bonaglia & Eliana La Ferrara & Massimiliano Marcellino, 2000. "Public Capital and Economic Performance: Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(2), pages 221-244, September.
  9. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda, Federal Reserve Bank of Chicago 88-7, Federal Reserve Bank of Chicago.
  10. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda, Federal Reserve Bank of Chicago 88-10, Federal Reserve Bank of Chicago.
  11. Lucio Picci, 1995. "Productivity and Infrastructure in the Italian Regions," Working Papers 230, Dipartimento Scienze Economiche, Universita' di Bologna.
  12. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers, University of Rochester - Center for Economic Research (RCER) 130, University of Rochester - Center for Economic Research (RCER).
  13. Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-87, May.
  14. Lucio Picci, 1995. "Il 'Capitale mancante' nel Mezzogiorno italiano," Working Papers 212, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
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Citations

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Cited by:
  1. Gianpiero Torrisi, 2010. "Infrastructures and Economic Performance: A Critical Comparison Across Four Approaches," Theoretical and Practical Research in Economic Fields, ASERS Publishing, ASERS Publishing, vol. 0(1), pages 86-96, June.
  2. Balázs Égert & Tomasz Kozluk & Douglas Sutherland, 2009. "Infrastructure and Growth: Empirical Evidence," OECD Economics Department Working Papers 685, OECD Publishing.
  3. Davide Piacentino, 2008. "Productivity, Infrastructures and Convergence: Panel Data Evidence on Italian Regions," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2008(2), pages 5-26.
  4. Guido Ascari & Valeria di Cosmo, 2005. "Determinants of total factor productivity in the italian Regions," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2005(2).
  5. Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers, European Investment Bank, Economics Department 2/2005, European Investment Bank, Economics Department.
  6. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2010. "Dynamic Macroeconomic Effects of Public Capital: Evidence from Regional Italian Data," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 69(1), pages 29-66, April.
  7. E. Marrocu & R. Paci, 2006. "The effects of public capital on the productivity of the Italian regions," Working Paper CRENoS 200613, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  8. R. Paci & R. Pala & E. Marrocu, 2000. "Estimation of total factor productivity for regions and sectors in Italy. A panel cointegration approach," Working Paper CRENoS 200016, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  9. Torrisi, Gianpiero, 2009. "A multilevel analysis on the economic impact of public infrastructure and corruption on Italian regions," MPRA Paper 15487, University Library of Munich, Germany.
  10. Torrisi, Gianpiero, 2009. "Public infrastructure: definition, classification and measurement issues," MPRA Paper 12990, University Library of Munich, Germany.
  11. Federico Bonaglia & Eliana La Ferrara & Massimiliano Marcellino, . "Public Capital and Economic Performance: Evidence from Italy," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 163, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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