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And yet they Co-move! Public capital and productivity in OECD

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  • Bottasso, Anna
  • Castagnetti, Carolina
  • Conti, Maurizio

Abstract

In this paper, we add to the debate on the public capital–productivity link by applying very recent developments in the panel time series literature that take into account cross sectional correlation in non-stationary panels. In particular, we evaluate the productive effect of public capital by estimating various production functions on a panel of 21 OECD countries over the period 1975–2002. Our results suggest that public capital has a positive long run impact on output, with elasticities that range between 0.05 and 0.15, depending on model specification. These findings are robust to the existence of spillover effects from public capital investments in other countries and to the inclusion of other productivity determinants, like human capital, the stock of patents and R&D capital. Finally, we do not find any important effect of public capital on GDP in the short run: this suggests that public infrastructure investments might not be a powerful countercyclical policy instrument.

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  • Bottasso, Anna & Castagnetti, Carolina & Conti, Maurizio, 2013. "And yet they Co-move! Public capital and productivity in OECD," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 713-729.
  • Handle: RePEc:eee:jpolmo:v:35:y:2013:i:5:p:713-729
    DOI: 10.1016/j.jpolmod.2013.02.007
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    More about this item

    Keywords

    Public capital; Productivity; Panel cointegration; Cross-section dependence;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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