Do states optimize? Public capital and economic growth
This paper develops a non-linear theoretical relationship between public capital and economic growth in order to obtain estimates of the growth-maximizing ratio of public capital to private capital. The model is empirically implemented using data on the 48 contiguous U.S. states over the period 1970 to 1990. The empirical results provide evidence that (i) the relationship between public capital and economic growth is non-linear, (ii) the growth-maximizing public capital stock is approximately 60% to 80% as large as the private (tangible) capital stock, and (iii) permanent changes in public capital are associated with permanent changes in economic growth.
Volume (Year): 34 (2000)
Issue (Month): 3 ()
|Note:||Received: October 1998 / Accepted: June 1999|
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- 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.
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"How does public infrastructure affect regional economic performance?,"
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