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Public Capital, Congestion and Private Production in Australia

  • Lei Lei Song

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

This paper is an empirical investigation into the impact of public capital on the private sector’s economic activity in Australia. In particular, it is assumed that the contribution of public capital to private factor productivity is subject to congestion. New data sets of capital stocks and private output are constructed for the Australian economy. By estimating flexible functional forms of private sector production functions with congestion in public capital services, the paper shows that public capital is productive in private production but is subject to congestion. A one per cent decrease in the public capital output ratio would result in about 0.5 per cent decrease in private output. Empirical evidence also suggests that the restriction of constant returns to scale over private inputs, labour and private capital, and public inputs is valid.

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File URL: http://www.melbourneinstitute.com/downloads/working_paper_series/wp2002n23.pdf
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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2002n23.

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Length: 26 pages
Date of creation: Nov 2002
Date of revision:
Handle: RePEc:iae:iaewps:wp2002n23
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
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  1. Otto, Glenn & Voss, Graham M, 1994. "Public Capital and Private Sector Productivity," The Economic Record, The Economic Society of Australia, vol. 70(209), pages 121-32, June.
  2. repec:att:wimass:9428 is not listed on IDEAS
  3. Larry E. Jones & Rodolfo E. Manuelli, 1994. "The Sources of Growth," GE, Growth, Math methods 9410002, EconWPA, revised 05 Mar 1999.
  4. Berndt, Ernst & Hansson, Bengt, 1992. "Measuring the Contribution of Capital in Sweden," Working Paper Series 365, Research Institute of Industrial Economics.
  5. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
  6. Wim P. M. Vijverberg & Chu-Ping C. Vijverberg & Janet L. Gamble, 1997. "Public Capital And Private Productivity," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 267-278, May.
  7. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  8. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S151-68, Supplemen.
  9. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  10. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
  11. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  12. Lynde, Catherine & Richmond, James, 1992. "The Role of Public Capital in Production," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 37-44, February.
  13. Demetriades, Panicos O & Mamuneas, Theofanis P, 2000. "Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economics," Economic Journal, Royal Economic Society, vol. 110(465), pages 687-712, July.
  14. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
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