IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/9711009.html
   My bibliography  Save this paper

Dynamic Output and Employment Effects of Public Capital

Author

Listed:
  • David Alan Aschauer

    (The Jerome Levy Economics Institute)

Abstract

Some of my previous research investigates the static, or short run impacts of changes in the public capital stock on economic performance. For instance, in Aschauer (1997a) I use state level data for the period 1970 to 1990 and find that the public capital stock is an important determinant of the rate of growth of output per worker. Specifically, a one standard deviation increase in public capital (relative to private capital) induces an increase in the growth rate of output per worker of some 1.4 percent per year. Similarly, in Aschauer (1997b) I determine that the public capital stock is also a key factor lying behind the rates of growth of output and employment, with a one standard deviation rise in public capital generating an increase in the growth rate of output and employment, respectively, of about 1.6 and 0.5 percent per year. However, these findings leave open the question of the dynamic, or long run effects of public capital on the economy. To answer this question, it is just as important to understand the dynamic interrelationship between productivity, output, and employment as the economy evolves over time as it is to know the effect of public capital on the initial growth rates of these variables. For example, depending on the persistence of the increase in the productivity growth rate, any particular static increase in productivity growth can translate into a rather small of large increase in the long run level of output per worker. This paper explores these persistence concerns by stimulating the dynamic, long run effects of public capital on output and employment. Section II lays out a dynamic model relating output and employment growth to public capital, initial output, and initial employment--a minimalist model capable of capturing in a compact fashion the interrelationship between output and employment as the economy evolves over time. Section III presents empirical estimates of the model based on fixed effects regression analysis of U.S. state level date over the period 1970 to 1990. Section IV employs the estimated model to stimulate the long run impact of public capital under two scenarios-- where the state unemployment rate and the labor force, respectively, are assumed to be exogenous. Section V concludes the paper with some suggestions regarding future research.

Suggested Citation

  • David Alan Aschauer, 1997. "Dynamic Output and Employment Effects of Public Capital," Macroeconomics 9711009, EconWPA.
  • Handle: RePEc:wpa:wuwpma:9711009
    Note: Type of Document - WordPerfect; prepared on IBM PC ; to print on PostScript; pages: 55; figures: included
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/mac/papers/9711/9711009.pdf
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pal, Sarmistha, 2010. "Public infrastructure, location of private schools and primary school attainment in an emerging economy," Economics of Education Review, Elsevier, vol. 29(5), pages 783-794, October.
    2. Aschauer, David Alan, 2000. "Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency," Economic Development and Cultural Change, University of Chicago Press, vol. 48(2), pages 391-406, January.
    3. Escobal, Javier, 2005. "The Role of Public Infraestructure in Market Development in Rural Peru," MPRA Paper 727, University Library of Munich, Germany.
    4. Mäki-Arvela, Petteri, 2002. "Testing the Neoclassical Model of Regional Economic Growth: A Panel Data Approach across the Finnish Provinces, 1973-1996," The Review of Regional Studies, Southern Regional Science Association, vol. 32(2), pages 223-253, Summer/Fa.
    5. Nikos Benos & Nikolaos Mylonidis & Stefania Zotou, 2017. "Estimating production functions for the US states: the role of public and human capital," Empirical Economics, Springer, vol. 52(2), pages 691-721, March.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:9711009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.