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Infrastructure in a Structural Model of Economic Growth

  • Douglas Holtz-Eakin
  • Amy Ellen Schwartz

Researchers, commentators, and politicians have devoted steadily more attention to infrastructure in response to claims that inadequate accumulation of public capital has contributed to substandard U.S. economic growth. Despite this, the link between infrastructure and productivity growth remains controversial. In this regard, it is somewhat surprising that infrastructure research has developed in isolation from the large literature on economic growth. We develop a neoclassical growth model that explicitly incorporates infrastructure and is designed to provide a tractable framework within which to analyze the empirical importance of public capital accumulation to productivity growth. We find little support for claims of a dramatic productivity boost from increased infrastructure outlays. In a specification designed to provide an upper bound for the influence of infrastructure, we estimate that raising the rate of infrastructure investment would have had a negligible impact on annual productivity growth between 1971 and 1986.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4824.

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Date of creation: Aug 1994
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Publication status: published as Regional Science and Urban Economics, vol. 25, pp. 131-151, 1995
Handle: RePEc:nbr:nberwo:4824
Note: PE
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  1. Duffy-Deno, Kevin T. & Eberts, Randall W., 1991. "Public infrastructure and regional economic development: A simultaneous equations approach," Journal of Urban Economics, Elsevier, vol. 30(3), pages 329-343, November.
  2. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
  3. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  4. 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.
  5. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  7. Randall W. Eberts, 1990. "Public infrastructure and regional economic development," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 15-27.
  8. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  9. 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.
  10. Randall W. Eberts, 1986. "Estimating the contribution of urban public infrastructure to regional growth," Working Paper 8610, Federal Reserve Bank of Cleveland.
  11. Holtz-Eakin, Douglas, 1993. "Solow and States: Capital Accumulation, Productivity, and Economic Growth," National Tax Journal, National Tax Association, vol. 46(4), pages 425-39, December.
  12. 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.
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