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Balanced growth and public capital: an empirical analysis

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  • William Crowder
  • Daniel Himarios

Abstract

The balanced growth restrictions implied by the neoclassical growth model imply that output, the private capital stock and the public capital stock share the same stochastic trend. We analyse the postwar US data on real output, real private capital stock and real public capital stock and find that the balanced growth restrictions cannot be rejected by the data. Removing the common stochastic trend from each series allows the estimation of output elasticities that is free from the spurious regression problem. The results support Aschauer's (1989) claim that, at the margin, public capital is more productive than private capital.

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  • William Crowder & Daniel Himarios, 1997. "Balanced growth and public capital: an empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 29(8), pages 1045-1053.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:8:p:1045-1053
    DOI: 10.1080/000368497326435
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    References listed on IDEAS

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    Cited by:

    1. Christophe Kamps, 2005. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 533-558, August.
    2. Bertrand Candelon & Gilbert Colletaz & Christophe Hurlin, 2013. "Network Effects and Infrastructure Productivity in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 887-913, December.
    3. Zhu, Shengxiu & Oxley, Les, 2002. "New Zealand economic growth—endogenous or exogenous?," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 59(1), pages 125-131.
    4. Makuyana, Garikai & Odhiambo, Nicholas Mbaya, 2017. "Public and private investment and economic growth in Malawi: An ARDL-bounds testing approach," Working Papers 22003, University of South Africa, Department of Economics.
    5. Shengxiu Zhu & Les Oxley, 2001. "Testing models of growth - a two-sector model of the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 8(5), pages 325-329.
    6. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "The Macroeconomic Impact of Infrastructures: A Literature Review and Empirical Analysis on the Case of Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.
    7. Pedro R.D. Bom & Jenny E. Ligthart, 2009. "How Productive is Public Capital? A Meta-Regression Analysis," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0912, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Makuyana, Garikai & Odhiambo, Nicholas Mbaya, 2017. "Public and private investment and economic growth in South Africa:An empirical investigation," Working Papers 22005, University of South Africa, Department of Economics.
    9. MAKUYANA, Garikai & ODHIAMBO, Nicholas M., 2018. "Public and Private Investment and Economic Growth in Zambia: A Dynamic Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(4), pages 503-526.
    10. Everaert, Gerdie, 2003. "Balanced growth and public capital: an empirical analysis with I(2) trends in capital stock data," Economic Modelling, Elsevier, vol. 20(4), pages 741-763, July.
    11. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    12. Hurlin, Christophe & Minea, Alexandru, 2013. "Is public capital really productive? A methodological reappraisal," European Journal of Operational Research, Elsevier, vol. 228(1), pages 122-130.
    13. Alfredo M. Pereira & Jorge M. Andraz, 2013. "On The Economic Effects Of Public Infrastructure Investment: A Survey Of The International Evidence," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(4), pages 1-37, December.
    14. Federici, Andrea, 2018. "Il rapporto tra capitale pubblico e altre variabili macroeconomiche: un'applicazione empirica [The relationship between public capital and other macroeconomic variables: an empirical application]," MPRA Paper 88516, University Library of Munich, Germany.
    15. Pina, Alvaro Manuel & St. Aubyn, Miguel, 2005. "Comparing macroeconomic returns on human and public capital: An empirical analysis of the Portuguese case (1960-2001)," Journal of Policy Modeling, Elsevier, vol. 27(5), pages 585-598, July.
    16. Garikai Makuyana & Nicholas M. Odhiambo, 2017. "Public and private investment and economic growth in Zimbabwe: An empirical test," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 60-76, March.
    17. Nishija Unnikrishnan & Thomas Paul Kattookaran, 2020. "Impact of Public and Private Infrastructure Investment on Economic Growth: Evidence from India," Journal of Infrastructure Development, India Development Foundation, vol. 12(2), pages 119-138, December.
    18. Pedro R.D. Bom & Jenny E. Ligthart, 2014. "What Have We Learned From Three Decades Of Research On The Productivity Of Public Capital?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 889-916, December.
    19. Hurlin, Christophe, 2006. "Network effects of the productivity of infrastructure in developing countries," Policy Research Working Paper Series 3808, The World Bank.
    20. Makuyana, Garikai & Odhiambo, Nicholas M., 2017. "Public and private investment and economic growth in Zimbabwe: An empirical test," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(1).
    21. Pereira, João & St. Aubyn, Miguel, 2009. "What level of education matters most for growth?: Evidence from Portugal," Economics of Education Review, Elsevier, vol. 28(1), pages 67-73, February.
    22. Mr. Yasser Abdih & Mr. Frederick L Joutz, 2008. "The Impact of Public Capital, Human Capital, and Knowledge on Aggregate Output," IMF Working Papers 2008/218, International Monetary Fund.
    23. Federici, Andrea, 2018. "Il rapporto tra capitale pubblico e altre variabili macroeconomiche: analisi della letteratura [The relationship between public capital and other macroeconomic variable: a literature review]," MPRA Paper 88515, University Library of Munich, Germany.
    24. Andrei S. Akhremenko & Alexander Petrov, 2014. "Efficiency, Policy Selection, And Growth In Democracy And Autocracy: A Formal Dynamical Model," HSE Working papers WP BRP 16/PS/2014, National Research University Higher School of Economics.
    25. Silvia Bertarelli, 2006. "Public capital and growth," Politica economica, Società editrice il Mulino, issue 3, pages 361-398.

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