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Policy Watch: Infrastructure Investment and Economic Growth

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  • Alicia H. Munnell

Abstract

In the late 1980s, David Aschauer (1989) triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in U.S. productivity that occurred in the 1970s was precipitated by declining rates of public capital investment. My own work confirmed these results (Munnell, 1990a). Spending advocates seized on these findings as support for increased public investment. The enthusiasm among policymakers for the early Aschauer results was matched, if not surpassed, by skepticism on the part of many economists. Critics of these studies charged that the methodology was flawed, that the direction of causation between public investment and output growth is unclear and that, even if the historical empirical relationships were estimated correctly, they provide no clear indications for current policy. Who's right? What do we know and not know about the link between public infrastructure and productivity? And what are the implications of these results for policy?

Suggested Citation

  • Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
    • Handle: RePEc:aea:jecper:v:6:y:1992:i:4:p:189-98
    Note: DOI: 10.1257/jep.6.4.189
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.6.4.189
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    References listed on IDEAS

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    1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    2. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    3. John A. Tatom, 1991. "Public capital and private sector performance," Review, Federal Reserve Bank of St. Louis, issue May, pages 3-15.
    4. Clifford Winston, 1991. "Efficient Transportation Infrastructure Policy," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 113-127, Winter.
    5. Edward M. Gramlich, 1990. "How should public infrastructure be financed?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 223-245.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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