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Employment and Public Capital in Spain

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  • Xavier Raurich
  • Hector Sala

    ()
    (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)

  • Valeri Sorolla

Abstract

This paper analyses the e¤ects on employment of increasing the stock of public capital. To this end, we derive a wage equation so that wages are endogenized. This allows us to show that, by means of a higher elasticity of labour demand with respect to wages, a rise in public capital increases employment. The estimation of a structural model for the Spanish private sector tests and con…rms empirically this relationship. The results show that an increase in public capital has a significant and positive direct influence on employment, and indirect e¤ects derived from lower wages and higher economic growth. Finally, we undertake a simulation exercise to assess the long run efects on employment and economic growth of increasing public capital.

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Bibliographic Info

Paper provided by Department of Applied Economics at Universitat Autonoma of Barcelona in its series Working Papers with number wp0204-1.

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Length: 25 pages
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:uab:wprdea:wp0204-1

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Keywords: employment; wage equation; public capital; economic growth.;

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  1. 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.
  2. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
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  14. Pereira, Alfredo M & Sagales, Oriol Roca, 1999. "Public Capital Formation and Regional Development in Spain," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 281-94, October.
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