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Is public capital productive in Europe?

Author

Listed:
  • Gwenaelle Poilon

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Jérôme Creel

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper addresses the issue of whether and by how much public investment or public capital can increase GDP. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A vector autoregressive (VAR) model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a 'golden rule of public finance' in the European Monetary Union is legitimate in this respect.

Suggested Citation

  • Gwenaelle Poilon & Jérôme Creel, 2008. "Is public capital productive in Europe?," Sciences Po Economics Publications (main) hal-03416671, HAL.
    • Handle: RePEc:hal:spmain:hal-03416671
    DOI: 10.1080/02692170802407577
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03416671
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    Cited by:

    1. is not listed on IDEAS
    2. Pedro R. D. Bom & Jenny Ligthart, 2008. "How Productive is Public Capital? A Meta-Analysis," CESifo Working Paper Series 2206, CESifo.
    3. Jérôme Creel & Paul Hubert & Francesco Saraceno, 2013. "Assessing future sustainability of french public finances," Sciences Po Economics Publications (main) hal-01070452, HAL.
    4. J. F. M. De Jong & M. Ferdinandusse & J. Funda, 2018. "Public capital in the 21st century: as productive as ever?," Applied Economics, Taylor & Francis Journals, vol. 50(51), pages 5543-5560, November.
    5. 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.
    6. Cheam Chai Li & Rosli Mahmood & Hussin Abdullah & Ong Soon Chuan, 2013. "Economic Growth, Tourism and Selected Macroeconomic Variables: A Triangular Causal Relationship in Malaysia," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(2), pages 185-206, May.
    7. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p5488g8pn is not listed on IDEAS
    8. António Afonso & Jorge Caiado & Omar Al. Kanaan, 2024. "Public and Private Investments: A VAR Analysis of Their Impact of Economic Growth in 18 Advanced Economies," CESifo Working Paper Series 11426, CESifo.
    9. Sergio Jiménez Ramírez & Jaime Sana� Villarroya, 2011. "Infraestructuras y productividad industrial en Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE.
    10. Foster,Vivien & Gorgulu,Nisan & Straub,Stéphane & Vagliasindi,Maria, 2023. "The Impact of Infrastructure on Development Outcomes: A Qualitative Review of Four Decades of Literature," Policy Research Working Paper Series 10343, The World Bank.
    11. Carmen D. Ã lvarez-Albelo, 2018. "A calibration of the output elasticity of public capital," Economics Bulletin, AccessEcon, vol. 38(2), pages 761-771.
    12. Linus Mattauch & Jan Siegmeier & Ottmar Edenhofer & Felix Creutzig, 2013. "Financing Public Capital through Land Rent Taxation: A Macroeconomic Henry George Theorem," CESifo Working Paper Series 4280, CESifo.
    13. repec:spo:wpmain:info:hdl:2441/f6h8764enu2lskk9p5488g8pn is not listed on IDEAS
    14. 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.
    15. Khanna, Rupika & Sharma, Chandan, 2021. "Does infrastructure stimulate total factor productivity? A dynamic heterogeneous panel analysis for Indian manufacturing industries," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 59-73.
    16. 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.
    17. 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.
    18. J. F. M. De Jong & M. Ferdinandusse & J. Funda, 2018. "Public capital in the 21st century: as productive as ever?," Applied Economics, Taylor & Francis Journals, vol. 50(51), pages 5543-5560, November.
    19. 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.
    20. 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.
    21. Mohammed N. Abu Alfoul & Ayman Hassan Bazhair & Ibrahim N. Khatatbeh & Adam G. Arian & Mahmoud N. Abu Al-Foul, 2024. "The Effect of Education on Economic Growth in Sub-Saharan African Countries: Do Institutions Matter?," Economies, MDPI, vol. 12(11), pages 1-18, November.

    More about this item

    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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