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The impact of public capital on the US private economy: new evidence and analysis

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  • James Heintz

Abstract

This paper presents new evidence on the impact of public capital on the productivity of the US private sector. Using a production function approach, we estimate the impact of public investment on private capital productivity, specifically addressing the empirical critiques of earlier studies. We find evidence of a cointegrating relationship in a dynamic specification of an empirical model that includes public infrastructure as a factor of production, indicating the existence of a long-run relationship between the US public capital stock and the productivity of the private capital stock. The results are used to explore how the decline in the growth rate of the public capital stock would have affected the performance of the private sector.

Suggested Citation

  • James Heintz, 2010. "The impact of public capital on the US private economy: new evidence and analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 619-632.
    • Handle: RePEc:taf:irapec:v:24:y:2010:i:5:p:619-632
    DOI: 10.1080/02692170903426104
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    References listed on IDEAS

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    1. Jerome Creel & Gwenaelle Poilon, 2008. "Is public capital productive in Europe?," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(6), pages 673-691.
    2. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
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    5. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    6. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    7. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    8. Moreno, Rosina & Lopez-Bazo, Enrique & Artis, Manuel, 2002. "Public infrastructure and the performance of manufacturing industries: short- and long-run effects," Regional Science and Urban Economics, Elsevier, vol. 32(1), pages 97-121, January.
    9. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-1056, September.
    10. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Nine reasons to invest more in the nation’s infrastructure
      by epollack in Working Economics on 2011-09-27 19:48:10

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    3. Jeffrey Thompson, 2010. "Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives," Published Studies priorities_september7_per, Political Economy Research Institute, University of Massachusetts at Amherst.
    4. Miguel A Márquez & Julian Ramajo & Geoffrey Hewings, 2017. "Regional Public Stock Reductions in Spain: Estimations from a Multiregional Spatial Vector Autorregressive Model," REGION, European Regional Science Association, vol. 4, pages 129-146.
    5. Robert Kornfeld & Barbara M. Fraumeni, 2022. "How Should We Measure Infrastructure? The Case of Highways and Streets," BEA Working Papers 0196, Bureau of Economic Analysis.
    6. Khanna, Rupika & Sharma, Chandan, 2021. "Does infrastructure stimulate total factor productivity? A dynamic heterogeneous panel analysis for Indian manufacturing industries," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 59-73.
    7. Branimir Jovanovic, 2017. "Growth forecast errors and government investment and consumption multipliers," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(1), pages 83-107, January.
    8. Robert Pollin & Dean Baker, 2009. "Public Investment, Industrial Policy and U.S. Economic Renewal," Working Papers wp211, Political Economy Research Institute, University of Massachusetts at Amherst.
    9. Sanja Borkovic & Peter Tabak, 2018. "Public investment and corporate productivity in Croatia," Public Sector Economics, Institute of Public Finance, vol. 42(2), pages 171-186.
    10. Robert Pollin, 2011. "A Policy Framework for Advancing Productive Investments and Clean Energy throughout the U.S. Economy," Working Papers wp265, Political Economy Research Institute, University of Massachusetts at Amherst.
    11. Sajad Ahmad Bhat & Javed Ahmad Bhat & Taufeeq Ajaz, 2020. "The Public–Private Investment Nexus In India: Evidence From A Policy Simulation Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 101-128, January –.
    12. Kornfeld, Robert & Fraumeni, Barbara M., 2024. "How Should We Measure Infrastructure? The Case of Highways and Streets," IZA Discussion Papers 17156, Institute of Labor Economics (IZA).

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