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The impact of public capital on the US private economy: new evidence and analysis

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  • James Heintz

Abstract

This paper presents new evidence on the impact of public capital on the productivity of the US private sector. Using a production function approach, we estimate the impact of public investment on private capital productivity, specifically addressing the empirical critiques of earlier studies. We find evidence of a cointegrating relationship in a dynamic specification of an empirical model that includes public infrastructure as a factor of production, indicating the existence of a long-run relationship between the US public capital stock and the productivity of the private capital stock. The results are used to explore how the decline in the growth rate of the public capital stock would have affected the performance of the private sector.

Suggested Citation

  • James Heintz, 2010. "The impact of public capital on the US private economy: new evidence and analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 619-632.
  • Handle: RePEc:taf:irapec:v:24:y:2010:i:5:p:619-632
    DOI: 10.1080/02692170903426104
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    References listed on IDEAS

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    1. Jerome Creel & Gwenaelle Poilon, 2008. "Is public capital productive in Europe?," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(6), pages 673-691.
    2. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
    3. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    4. Everaert, Gerdie & Heylen, Freddy, 2001. "Public capital and productivity growth: evidence for Belgium, 1953-1996," Economic Modelling, Elsevier, vol. 18(1), pages 97-116, January.
    5. Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
    6. 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.
    7. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    8. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-1056, September.
    9. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Nine reasons to invest more in the nation’s infrastructure
      by epollack in Working Economics on 2011-09-27 19:48:10

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    Cited by:

    1. repec:taf:irapec:v:32:y:2018:i:4:p:525-545 is not listed on IDEAS
    2. Vitor M. Carvalho & Manuel M. F. Martins, 2011. "Macroeconomic effects of fiscal consolidations in a DSGE model for the Euro Area: does composition matter?," FEP Working Papers 421, Universidade do Porto, Faculdade de Economia do Porto.
    3. repec:ipf:psejou:v:42:y:2018:i:2:p:171-186 is not listed on IDEAS
    4. repec:taf:irapec:v:31:y:2017:i:1:p:83-107 is not listed on IDEAS
    5. Lorenzo Carbonari & Vincenzo Atella & Paola Samà, 2018. "Hours worked in selected OECD countries: an empirical assessment," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 525-545, July.

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    Keywords

    public investment; infrastructure; crowding out;

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