IDEAS home Printed from https://ideas.repec.org/p/bdi/wptemi/td_733_09.html
   My bibliography  Save this paper

Dynamic macroeconomic effects of public capital: evidence from regional Italian data

Author

Listed:
  • Valter Di Giacinto

    () (Bank of Italy)

  • Giacinto Micucci

    () (Bank of Italy)

  • Pasqualino Montanaro

    () (Bank of Italy JEL classification: C32, H54, R53)

Abstract

This paper assesses the effects of public capital in Italy on the main macroeconomic aggregates: GDP, private capital and labour. A cointegrated vector autoregressive (VAR) model, in line with recent advancements in the field, allows us to take into account the complex nexus of direct and indirect links between the variables. We find a persistent increase in GDP in response to a positive shock to public capital; this result is mainly attributable to a strong stimulus exerted by public infrastructures on private capital (crowding in). The positive effects of public capital are quite pervasive across Italy, albeit to differing extents. In particular, a higher elasticity of GDP to public capital is estimated for the South, whereas marginal productivity turns out to be higher in the Centre-North. This suggests that public capital has a lower economic return in the South, bearing out the existence of a potential conflict between equity and efficiency goals. Finally, we indirectly document the existence of positive spillover effects at the regional level, allowing individual regions to benefit from the endowment of public capital in the rest of the country.

Suggested Citation

  • Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2009. "Dynamic macroeconomic effects of public capital: evidence from regional Italian data," Temi di discussione (Economic working papers) 733, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_733_09
    as

    Download full text from publisher

    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2009/2009-0733/en_tema_733.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lippi, Marco & Reichlin, Lucrezia, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Comment," American Economic Review, American Economic Association, vol. 83(3), pages 644-652, June.
    2. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    3. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
    4. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-334, June.
    5. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17, pages 37-75, March.
    6. Lippi, Marco & Reichlin, Lucrezia, 1994. "VAR analysis, nonfundamental representations, blaschke matrices," Journal of Econometrics, Elsevier, vol. 63(1), pages 307-325, July.
    7. Douglas Holtz-Eakin & Amy Schwartz, 1995. "Spatial productivity spillovers from public infrastructure: Evidence from state highways," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(3), pages 459-468, October.
    8. L. Picci, 1995. "Lo Stock di capitale nelle Regioni Italiane," Working Papers 229, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    10. Federico Bonaglia & Eliana La Ferrara & Massimiliano Marcellino, 2000. "Public Capital and Economic Performance: Evidence from Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 59(2), pages 221-244, September.
    11. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    12. 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.
    13. repec:ebl:ecbull:v:8:y:2006:i:5:p:1-4 is not listed on IDEAS
    14. Miguel St. Aubyn & Álvaro Manuel Pina, 2006. "How should we measure the return on public investment in a VAR?," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-4.
    15. Pereira, Alfredo Marvao & Roca-Sagales, Oriol, 2003. "Spillover effects of public capital formation: evidence from the Spanish regions," Journal of Urban Economics, Elsevier, vol. 53(2), pages 238-256, March.
    16. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
    17. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2007. "Assessing Structural VARs," NBER Chapters,in: NBER Macroeconomics Annual 2006, Volume 21, pages 1-106 National Bureau of Economic Research, Inc.
    18. Raffaello Bronzini & Paolo Piselli, 2006. "Determinants of long-run regional productivity: the role of R&D, human capital and public infrastructure," Temi di discussione (Economic working papers) 597, Bank of Italy, Economic Research and International Relations Area.
    19. Lucio Picci, 1999. "Productivity and Infrastructure in the Italian Regions," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(3-4), pages 329-353, December.
    20. Blanchard, Olivier Jean & Quah, Danny, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Reply," American Economic Review, American Economic Association, vol. 83(3), pages 653-658, June.
    21. Sergio Destefanis & Vania Sena, 2005. "Public capital and total factor productivity: New evidence from the Italian regions, 1970-98," Regional Studies, Taylor & Francis Journals, vol. 39(5), pages 603-617.
    22. Lucia Alessi & Matteo Barigozzi & Marco Capasso, 2007. "A Review of Nonfundamentalness and Identification in Structural VAR Models," LEM Papers Series 2007/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    23. 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.
    24. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    25. Eliana La Ferrara & Massimiliano Marcellino, "undated". "TFP, Costs, and Public Infrastructure: An Equivocal Relationship," Working Papers 176, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    26. Phillips, Peter C. B., 1998. "Impulse response and forecast error variance asymptotics in nonstationary VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 21-56.
    27. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    28. Gamber, Edward N & Joutz, Frederick L, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Comment," American Economic Review, American Economic Association, vol. 83(5), pages 1387-1393, December.
    29. Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
    30. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    31. Baghli, M. & Cahn, C. & Villetelle, J-P., 2006. "Estimating Potential Output with a Production Function for France, Germany and Italy," Working papers 146, Banque de France.
    32. Holtz-Eakin, Douglas, 1993. "State-specific estimates of state and local government capital," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 185-209, April.
    33. Pereira, Alfredo Marvao & Roca-Sagales, Oriol, 2003. "Erratum to "Spillover effects of public capital formation: evidence from the Spanish regions": [Journal of Urban Economics 53 (2003) 238-256]," Journal of Urban Economics, Elsevier, vol. 54(1), pages 197-197, July.
    34. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "Network effects of public transport infrastructure: Evidence on Italian regions," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 515-541, August.
    2. 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.

    More about this item

    Keywords

    public capital; crowding in effects; Italian regional divides; VAR models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_733_09. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/bdigvit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.