Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states
AbstractApplying a Barro-style model of endogenous growth to a fifty-year panel of states from 1957 to 2007, We examine the extent to which expenditures on public education and infrastructure— together with the taxes necessary to support them— enhance or impede the steady-state growth of state and local economies, as measured by per capita personal income. Our findings suggest that the independent effect of tax expenditures on either public infrastructure or education alone is significantly negative, but the complementary effect of each on the other is positive enough to make their combined effect significantly positive— except at large scales, where we find diseconomies, consistent with the ‘growth hill’ predicted by theory. Policy effects are identified empirically using a recursive structure with very long lags, GMM/instrumental variables, and controls for both fixed and time-varying heterogeneity. Results are robust to a variety of alternative specifications.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16173.
Date of creation: 2009
Date of revision:
growth human capital public infrastructure;
Find related papers by JEL classification:
- H4 - Public Economics - - Publicly Provided Goods
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- H00 - Public Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-17 (All new papers)
- NEP-EDU-2009-07-17 (Education)
- NEP-HRM-2009-07-17 (Human Capital & Human Resource Management)
- NEP-PBE-2009-07-17 (Public Economics)
- NEP-URE-2009-07-17 (Urban & Real Estate Economics)
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