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Is public capital really productive? A methodological reappraisal

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  • Hurlin, Christophe
  • Minea, Alexandru

Abstract

We present an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors’ productivity. Based on a simple stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data, we show that the production function approach may not be reliable to estimate this contribution. Our analysis reveals that this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs.

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  • Hurlin, Christophe & Minea, Alexandru, 2013. "Is public capital really productive? A methodological reappraisal," European Journal of Operational Research, Elsevier, vol. 228(1), pages 122-130.
  • Handle: RePEc:eee:ejores:v:228:y:2013:i:1:p:122-130
    DOI: 10.1016/j.ejor.2012.12.030
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