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Time-varying impact of public capital on output: New evidence based on VARs for OECD countries

Author

Listed:
  • Jong-A-Pin, Richard

    (University of Groningen, the Netherlands)

  • de Haan, Jakob

    (University Groningen, the Netherlands)

Abstract

This paper presents new estimates for 21 OECD countries covering the period 1960-2001, focusing on two questions: To what extent does the impact of public capital on output differ across countries? And to what extent does it differ over time? Using vector autoregressions (VARs), we find that in some countries a shock to public capital has a positive long-run impact on GDP while in others the longrun impact is zero or even negative. We also find that variability of public capital and its long-run impact on output are negatively correlated. Furthermore, when the public capital stock is large relative to the private capital stock the long-run impact of public capital is lower. Our results on 'recursive' VARs suggest that in the majority of countries the effect of a public-capital shock on output has decreased over time. Countries where the impact of public capital decreased during the 1990s have a declining public-capital-to-GDP ratio, and vice versa. Estimates based on a panel VAR for the OECD area confirm the declining long-run impact of public capital.

Suggested Citation

  • Jong-A-Pin, Richard & de Haan, Jakob, 2008. "Time-varying impact of public capital on output: New evidence based on VARs for OECD countries," EIB Papers 3/2008, European Investment Bank, Economics Department.
  • Handle: RePEc:ris:eibpap:2008_003
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    Citations

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    Cited by:

    1. 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.
    2. Jäger, Philipp & Schmidt, Torsten, 2016. "The political economy of public investment when population is aging: A panel cointegration analysis," European Journal of Political Economy, Elsevier, vol. 43(C), pages 145-158.
    3. Barabas, György & Kitlinski, Tobias & Schmidt, Christoph M. & Schmidt, Torsten & Siemers, Lars-H. & Brilon, Werner, 2010. "Verkehrsinfrastrukturinvestitionen: Wachstumsaspekte im Rahmen einer gestaltenden Finanzpolitik. Endbericht - Januar 2010. Forschungsprojekt im Auftrag des Bundesministeriums der Finanzen. Projektnumm," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72601.
    4. Välilä, Timo, 2020. "Infrastructure and growth: A survey of macro-econometric research," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 39-49.
    5. Masten, Igor & Grdović Gnip, Ana, 2019. "Macroeconomic effects of public investment in South-East Europe," Journal of Policy Modeling, Elsevier, vol. 41(6), pages 1179-1194.
    6. Hans Pitlik, 2010. "Fiscal Governance and Government Investment in Europe since the 1990s," WIFO Working Papers 370, WIFO.

    More about this item

    Keywords

    vector autoregression; panel VAR; public capital; impulse response; output effect;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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