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The Contribution of Local Public Infrastructure to Private Productivity and Its Political Economy: Evidence from a Panel of Large German Cities

  • Kemmerling, Achim
  • Stephan, Andreas

This paper proposes a simultaneous-equation approach to the estimation of the contribution of infrastructure accumulation to private production. A political economy model for the allocation of public infrastructure investment grants is formulated. Our empirical findings, using a panel of large German cities for the years 1980,1986, and 1988, suggest that cities ruled by a council sharing the State ("Bundesland") government's current political affiliation were particularly successful in attracting infrastructure investment grants. With regard to the contribution of infrastructure accumulation to growth, we find that public capital is a significant factor in private production. Moreover, at least for the sample studied, we find that simultaneity between output and public capital is weak; thus, feedback effects from output to infrastructure are negligible. Copyright 2002 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 113 (2002)
Issue (Month): 3-4 (December)
Pages: 403-24

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Handle: RePEc:kap:pubcho:v:113:y:2002:i:3-4:p:403-24
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  3. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 1999. "A Political Economy Model of Infrastructure Allocation: An Empirical Assessment," CIG Working Papers FS IV 99-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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  8. Grossman, Philip J, 1994. " A Political Theory of Intergovernmental Grants," Public Choice, Springer, vol. 78(3-4), pages 295-303, March.
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  13. Oulasvirta, Lasse, 1997. " Real and Perceived Effects of Changing the Grant System from Specific to General Grants," Public Choice, Springer, vol. 91(3-4), pages 397-416, June.
  14. David Alan Aschauer, 1990. "Why is infrastructure important?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 21-68.
  15. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May.
  16. Garcia-Mila, Teresa & McGuire, Therese J., 1992. "The contribution of publicly provided inputs to states' economies," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 229-241, June.
  17. 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.
  18. Alicia H. Munnell & Leah M. Cook, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
  19. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  20. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  21. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  22. Crain, W Mark & Oakley, Lisa K, 1995. "The Politics of Infrastructure," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 1-17, April.
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  25. Hulten, Charles R. & Schwab, Robert M., 1997. "A fiscal federalism approach to infrastructure policy," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 139-159, April.
  26. Seitz, Helmut, 1994. "Public capital and the demand for private inputs," Journal of Public Economics, Elsevier, vol. 54(2), pages 287-307, June.
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