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On the regional impact of public capital formation in spain

  • Alfredo Marvão Pereira

    ()

    (Department of Economics The College of William and Mary)

  • Oriol Roca-Sagalés

    ()

    (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)

The objective of this paper is to investigate, in a methodologically consistent manner, the regional effects of public capital formation and the possible existence of regional spillover effects in Spain. The empirical results are based on VAR estimates at both the aggregate and regional levels using output, employment, and private capital, as well as different measures of public capital. Empirical results suggest that public capital affects output positively at the aggregate level as well as in all but one region. For most regions, the effects of public capital installed in the region itself are important but the spillover effects induced from public capital installed elsewhere are also very important. In fact, the spillover effects account for over half of the total effects of public capital formation in Spain. Furthermore, these spillover effects have a clear geographical pattern in that they tend to be more important in the peripheral regions of the country. We also find that relative to their share of the Spanish output, the biggest beneficiaries of public capital formation are the largest regions in the country. This suggests that public capital formation has contributed to concentration of output in these regions. Finally, in terms of the effects of public capital formation on the private inputs we find that both private capital and employment are affected positively at the aggregate level as well as for most of the regions. Nevertheless, the effects on private capital seem to be larger. Also, the spillover effects are very important for private capital but not for employment. This reflects a great degree of dynamism and mobility in the capital markets as opposed to the labor markets.

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File URL: http://www.ecap.uab.es/RePEc/doc/wpdea0305.pdf
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Paper provided by Department of Applied Economics at Universitat Autonoma of Barcelona in its series Working Papers with number wpdea0305.

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Length: 37 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:uab:wprdea:wpdea0305
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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  2. Bentolila, Samuel, 1997. "Sticky labor in Spanish regions," European Economic Review, Elsevier, vol. 41(3-5), pages 591-598, April.
  3. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  4. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
  5. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February.
  6. Robert Eisner, 1991. "Infrastructure and regional economic performance: comment," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 47-58.
  7. Kevin T. Duffy-Deno & Randall W. Eberts, 1989. "Public infrastructure and regional economic development: a simultaneous equations approach," Working Paper 8909, Federal Reserve Bank of Cleveland.
  8. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  9. Garcia-Mila, Teresa & McGuire, Therese J., 1992. "The contribution of publicly provided inputs to states' economies," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 229-241, June.
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