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The impact of the provision of public infrastructures on regional economic development in Germany

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  • Seitz, Helmut
  • Licht, Georg

Abstract

The present paper presents an analysis of the impact of public infrastructure capital on regional economic developments in Germany. After presenting some descriptive statistical data on the economies of the 11 regions in (West) Germany a simple theoretical model of a cost-minimizing firm is presented in which the stock of public capital is included as a proxy for public services provided to firms as a fixed unpaid factor of production. Duality theory is used to recover the productivity effects of public infrastructures by calculating the cost-saving effects that are associated with public services. It is shown that these cost-saving effects work their way through adjustments in the demand for private inputs. Using a translog cost 'function we present panel estimates for the 11 federal states of (West) Germany with labour, structures and equipment as private factors of production. The results strongly indicate that public capital formation encourages private investment. In addition, it is demonstrated empirically that with respect to private capital a distinction between structures and equipment is of crucial importance because the effects on the former are of far greater importance than the effects on the latter.

Suggested Citation

  • Seitz, Helmut & Licht, Georg, 1993. "The impact of the provision of public infrastructures on regional economic development in Germany," ZEW Discussion Papers 93-13, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:9313
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    References listed on IDEAS

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    Cited by:

    1. Buscher, Herbert S. & Felder, Johannes & Steiner, Viktor, 1999. "Regional convergence and economic performance: a case study of the West German Laender," ZEW Discussion Papers 99-10, ZEW - Leibniz Centre for European Economic Research.
    2. Stephanie Aubert & Andreas Stephan, 2000. "Regional Infrastructure Policy and its Impact on Productivity: A Comparison of Germany and France," CIG Working Papers FS IV 00-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    3. Andreas Stephan, 2003. "Assessing the contribution of public capital to private production: Evidence from the German manufacturing sector," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(4), pages 399-417.
    4. Somik Lall, 2007. "Infrastructure and regional growth, growth dynamics and policy relevance for India," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(3), pages 581-599, September.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H4 - Public Economics - - Publicly Provided Goods

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