Public capital and small firm performance
Previous research on the role of public capital (infrastructure) in private production has emphasized potential complementarities between public and private capital at an aggregate level. Presumably such effects, if they exist, arise from benefits enjoyed by individual units of production. Because of the potential for them to be location-specific or capital constrained, it is conceivable that small businesses may benefit disproportionately from public capital. Tests using financial data for 871 small firms from 1992–96 indicate a positive and statistically significant elasticity between private labor productivity and the level of public capital in the area where the firms are located. Such a positive elasticity provides further evidence that public and private capital are complementary inputs into production and has important policy implications. Copyright International Atlantic Economic Society 2004
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Volume (Year): 32 (2004)
Issue (Month): 1 (March)
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