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Rates of return to public and private capital: new estimates using nonlinear Euler equations

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  • Jose E. Bosca
  • Antonio Cutanda
  • Javier Escriba

Abstract

Results obtained by Otto and Voss show that public investment undertaken in Australia over recent decades satisfies conditions for intertemporal efficiency. This paper confirms this result, although lower output elasticities and rates of return to private and public capital are obtained. The reason for these results is that the earlier work is extended by estimating the parameter related to the elasticity of intertemporal substitution that was earlier restricted to a specific value. In fact, it is shown here that it is possible to obtain an economically reasonable (and statistically significant) estimate of this parameter by assuming that the stochastic discount factor for the representative firm is the same as for the representative consumer and equal to a gross real interest rate.

Suggested Citation

  • Jose E. Bosca & Antonio Cutanda & Javier Escriba, 2004. "Rates of return to public and private capital: new estimates using nonlinear Euler equations," Applied Economics, Taylor & Francis Journals, vol. 36(11), pages 1225-1232.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:11:p:1225-1232
    DOI: 10.1080/0003684042000191129
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    1. Otto, Glenn D. & Voss, Graham M., 1998. "Is public capital provision efficient?," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 47-66, June.
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    Cited by:

    1. Emanuela Marrocu & Raffaele Paci, 2010. "The effects of public capital on the productivity of the Italian regions," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 989-1002.
    2. Robert Fenge & Matthias Wrede, 2007. "EU Financing and Regional Policy: Vertical Fiscal Externalities when Capital is Mobile," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 457-476, December.
    3. José E. Boscá & Antonio Cutanda & Javier Escribá, 2006. "Efficiency in the provision of public and private capital in 15 OECD countries," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 207-237, May.
    4. Thomas M. Fullerton Jr & Azucena González Monzón & Adam G. Walke, 2013. "Physical Infrastructure and Economic Growth in El Paso," Economic Development Quarterly, , vol. 27(4), pages 363-373, November.

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