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Public Capital and Economic Performance: Evidence from Italy

Author

Listed:
  • Federico Bonaglia

    (OECD)

  • Eliana La Ferrara

    (Bocconi University and IGIER)

  • Massimiliano Marcellino

    (Bocconi University, IGIER and EUI)

Abstract

This paper addresses the issue of whether and by how much public capital can enhance economic performance. We apply different methodologies to Italian regional data for the period 1970-1994. The results are presented for Italy as a whole, for different macroregions, and for individual categories of public capital. For the Center and the South, the methodologies employed indicate a positive contribution of infrastructure investment to TFP growth, output, and cost reduction. However, the magnitude of the cost reducing effect does not seem large enough to outweigh the social user cost of public capital. Also, we get mixed results on which types of infrastructure are most effective. Overall, investment in transportation appears to be the most productive: railways in the North and roads in the Center and South are the categories that mostly contributed to TFP growth.

Suggested Citation

  • Federico Bonaglia & Eliana La Ferrara & Massimiliano Marcellino, 2000. "Public Capital and Economic Performance: Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(2), pages 221-244, September.
    • Handle: RePEc:gde:journl:gde_v59_n2_p221-244
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    JEL classification:

    • 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
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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