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Public infrastructure, private capital and the performance of manufactures: short and long run effects

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  • Rosina Moreno

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Abstract

Despite the general idea among economists that public capital is a necessary but not sufficient condition for regional economic development, there is not consensus on the quantification of its effect. It is our belief that the variety of results on infrastructure impact in the economic literature is due to the fact that it depends on a series of factors. Among them we can think of a different sectoral effect, the level of economic development in the area, so as the amount of the existing public capital stocks and their interaction with infrastructures in other regions. In this paper we focus on this latter condition, having into account that the evidence on public capital spillovers obtained in other studies is not homogeneous. This way, whereas in Holtz-Eakin and Schwartz (1995) the stock of highways in a state does not suppose benefits in productivity further its borders, Mas et al. (1997) obtain that the infrastructural endowment in the neighbours can be important. Using different functional forms, the first purpose of this paper is to shed light into the existence of public capital spillovers considering not only the physical interaction among regions but also other forms of relationship such as trade linkages. In a second step, we follow a discusion on the existence of other economic externalities that in case of not being considered could be the reason why we obtain biased estimations for regional returns to scale. Both purposes are treated through the use of spatial econometrics techniques in the Spanish regional case. Keywords: Public capital, Infrastructure Spillovers, External Effects, Spatial Econometrics

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa98p165.

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Date of creation: Aug 1998
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Handle: RePEc:wiw:wiwrsa:ersa98p165

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  1. de la Fuente, Angel, 2002. "On the sources of convergence: A close look at the Spanish regions," European Economic Review, Elsevier, vol. 46(3), pages 569-599, March.
  2. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  3. Bruinsma, F.R. & Rienstra, S.A. & Rietveld, P., 1995. "Economic impacts of the construction of a transport corridor: a multi-level and multi-apprach case study for the construction of the A1 highway in the Netherlands," Serie Research Memoranda 0011, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  4. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Holtz-Eakin, Douglas & Lovely, Mary E., 1996. "Scale economies, returns to variety, and the productivity of public infrastructure," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 105-123, April.
  6. Rosina Moreno Serrano & Manuel Artis Ortuno & Enrique Lopez Bazo & Jordi Surinach Caralt, 1997. "Evidence on the complex link between infrastructure and regional growth," Working Papers in Economics 19, Universitat de Barcelona. Espai de Recerca en Economia.
  7. Rafael Domenech Vilariño, 1993. "Funciones de costes para la banca española: un análisis con datos de panel," Investigaciones Economicas, Fundación SEPI, vol. 17(2), pages 263-284, May.
  8. Schankerman, Mark & Nadiri, M. Ishaq, 1986. "A test of static equilibrium models and rates of return to quasi-fixed factors, with an application to the Bell system," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 97-118.
  9. 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.
  10. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-80, February.
  11. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
  12. M. Ishaq Nadiri & Seongjun Kim, 1996. "International R&D Spillovers, Trade and Productivity in Major OECD Countries," NBER Working Papers 5801, National Bureau of Economic Research, Inc.
  13. Jeffrey I. Bernstein & Xiaoyi Yan, 1995. "International R&D Spillovers between Canadian and Japanese Industries," NBER Working Papers 5401, National Bureau of Economic Research, Inc.
  14. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  15. Catherine J. Morrison & Donald Siegel, 1997. "External Capital Factors And Increasing Returns In U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 647-654, November.
  16. Appelbaum, Elie, 1978. "Testing neoclassical production theory," Journal of Econometrics, Elsevier, vol. 7(1), pages 87-102, February.
  17. Ernst R. Berndt & Bengt Hansson, 1991. "Measuring the Contribution of Public Infrastructure Capital in Sweden," NBER Working Papers 3842, National Bureau of Economic Research, Inc.
  18. M. Ishaq Nadiri & Theofanis P. Mamuneas, 1991. "The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries," NBER Working Papers 3887, National Bureau of Economic Research, Inc.
  19. Seitz, Helmut, 1995. "The Productivity and Supply of Urban Infrastructures," The Annals of Regional Science, Springer, vol. 29(2), pages 121-41, May.
  20. Ai, Chunrong & Cassou, Steven P., 1997. "On public capital analysis with state data," Economics Letters, Elsevier, vol. 57(2), pages 209-212, December.
  21. Button, Kenneth J, et al, 1995. "Transport and Industrial and Commercial Location," The Annals of Regional Science, Springer, vol. 29(2), pages 189-206, May.
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