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The Impact of Public Capital, Human Capital, and Knowledgeon Aggregate Output

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  • Frederick L. Joutz
  • Yasser Abdih

Abstract

This paper investigates the impact of public capital on private sector output by testing and estimating an aggregate production function for the U.S. economy over the postwar period augmented to include the stock of public capital as an additional factor input. We use patent applications to proxy for knowledge/technology stocks and adjust labor hours for changes in human capital or skill. Using Johansen''s (1988 and 1991) multivariate cointegration analysis, we find a positive and significant long run effect of public capital, private capital, skilladjusted labor, and technology/ knowledge on private sector output. We find that public capital accounts for about half of the post-1973 productivity slowdown, but only plays a minor role in the partial recovery of labor productivity growth since the mid 1980s. The largest contribution to that (partial) recovery comes from the knowledge stock and human capital.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/218.

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Length: 48
Date of creation: 01 Sep 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/218

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Keywords: Human capital; Economic growth; Public finance; Labor productivity; Economic models; cointegration; equation; statistic; statistics; patent applications; patents; r & d; dummy variables; heteroscedasticity; finite sample; correlation; patent office; logarithms; equations; autocorrelation; time series; dummy variable; survey; standard errors; data analysis; significance level; r & d expenditures; correlations; number of patent applications; econometrics; explanatory power; basic research; total patent applications; samples; total number of patent applications; r & d stocks; sample size; simultaneous equation; standard error; regression analysis; r & d stock; multivariate distribution; causation; covariance; forecasting; normal distribution; patent activity; research policy; instrumental variables; computation; statistical inference; dynamic system; surveys; statistical analysis; logarithm; orthogonality; sample bias; patent applications data; granger causality; maximum likelihood estimation; sensitivity analysis; homoscedasticity; r & d growth; hypothesis testing; statistical methodology;

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Cited by:
  1. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "The Macroeconomic Impact of Infrastructures: A Literature Review and Empirical Analysis on the Case of Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, Associazione Rossi Doria, issue 1, March.
  2. Alfredo Marvão Pereira & Jorge M. Andraz, 2013. "On the economic effects of public infrastructure investment:A survey of the international evidence," Working Papers, Department of Economics, College of William and Mary 108, Department of Economics, College of William and Mary.

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