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Is public capital really productive? A methodological reappraisal

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  • Alexandru Minea

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Christophe Hurlin

    (LEO - Laboratoire d'Économie d'Orleans - CNRS - Centre National de la Recherche Scientifique - Université de Tours - UO - Université d'Orléans)

Abstract

We present an evaluation of the main empirical approaches used in the literature to estimate the contribution of public capital stock to growth and private factors' productivity. Based on a simple stochastic general equilibrium model, built as to reproduce the main long-run relations observed in US post-war historical data, we show that the production function approach may not be reliable to estimate this contribution. Our analysis reveals that this approach largely overestimates the public capital elasticity, given the presence of a common stochastic trend shared by all non-stationary inputs.

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  • Alexandru Minea & Christophe Hurlin, 2013. "Is public capital really productive? A methodological reappraisal," Post-Print halshs-00804179, HAL.
  • Handle: RePEc:hal:journl:halshs-00804179
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00804179
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    2. Mamatzakis, E. & Tsionas, M., 2018. "Revisiting the returns of public infrastructure in Mexico: A limited information local likelihood estimation," Economic Modelling, Elsevier, vol. 75(C), pages 132-141.

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