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Do states optimize? Public capital and economic growth

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  • David Alan Aschauer

    (Bates College, Lewiston, Maine 04240, USA)

Abstract

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.

Suggested Citation

  • David Alan Aschauer, 2000. "Do states optimize? Public capital and economic growth," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(3), pages 343-363.
    • Handle: RePEc:spr:anresc:v:34:y:2000:i:3:p:343-363
    Note: Received: October 1998 / Accepted: June 1999
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