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Growth, increasing returns, and public infrastructure : time series evidence

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  • Ferreira, Pedro Cavalcanti
  • Issler, João Victor

Abstract

Initial endogenous growth models emphasized the importance of external effects and increasing retums in explaining growth. Empirically, this hypothesis can be confumed if the coefficient of physical capital per hour is unity in the aggregate production function. Previous estimates using time series data rejected this hypothesis, although cross-country estimates did nol The problem lies with the techniques employed, which are unable to capture low-frequency movements of high-frequency data. Using cointegration, new time series evidence confum the theory and conform to cross-country evidence. The implied Solow residual, which takes into account externaI effects to aggregate capital, has its behavior analyzed. The hypothesis that it is explained by government expenditures on infrasttucture is confIrmed. This suggests a supply-side role for government affecting productivity.

Suggested Citation

  • Ferreira, Pedro Cavalcanti & Issler, João Victor, 1995. "Growth, increasing returns, and public infrastructure : time series evidence," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 258, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:258
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    1. Bougheas, Spiros & Demetriades, Panicos O. & Morgenroth, Edgar L. W., 1999. "Infrastructure, transport costs and trade," Journal of International Economics, Elsevier, vol. 47(1), pages 169-189, February.
    2. Mendes, Sergio Magno & Teixeira, Erly Cardoso & Salvato, Marcio Antonio, 2008. "Effect of infrastructure investments on total factor productivity (TFP) in Brazilian agriculture," Working Papers in Applied Economics 53441, Universidade Federal de Vicosa, Departamento de Economia Rural.
    3. Mendes, Sergio Magno & Salvato, Marcio Antonio & Teixeira, Erly Cardoso & Mendes, Sérgio Magno, 2009. "Investimentos em Infra-Estrutura e Produtividade Total dos Fatores na Agricultura Brasileira, 1985 - 2004," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 63(2), June.

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