Public Capital and Economic Growth: A Critical Survey

Abstract This article provides an overview of both theoretical and empirical literature on the link between public investment (capital) and economic growth (national income). We first survey the channels through which public capital can conceivably affect growth.We then turn to reviewing the existing empirical literature, and we conclude that although not all studies find a growth-enhancing effect of public capital, there is now more consensus than in the past that public capital furthers economic growth. However, the impact reported by recent studies is not as big as some earlier studies suggested. We conclude with an overview of what is known about the optimality of public capital stocks. 52

[1]  James D. Gwartney,et al.  Institutions and the Impact of Investment on Growth , 2006 .

[2]  P. Vertova,et al.  Public Investment and Economic Performance in Highly Indebted Poor Countries: An Empirical Assessment , 2006 .

[3]  Christophe Hurlin,et al.  Estimates of Government Net Capital Stocks for 26 Developing Countries, 1970-2002 , 2006 .

[4]  J. Mintz,et al.  Incentives for Public Investment Under Fiscal Rules , 2006 .

[5]  E. Atukeren.  Politico-Economic Determinants of the Crowding-In Effects of Public Investments in Developing Countries , 2006 .

[6]  Jakob de Haan,et al.  Determinants of long-term growth: New results applying robust estimation and extreme bounds analysis , 2005 .

[7]  Tarik Yousef,et al.  Public Infrastructure and Private Investment in the Middle East and North Africa , 2005 .

[8]  Pantelis Kalaitzidakis,et al.  'New' Public Investment And/Or Public Capital Maintenance for Growth? The Canadian Experience , 2005 .

[9]  E. Atukeren.  Interactions between Public and Private Investment: Evidence from Developing Countries , 2005 .

[10]  Christophe Kamps.  The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries , 2005 .

[11]  Timo Valila.  How expensive are cost savings? On the economics of public-private partnerships , 2005 .

[12]  A. Estache,et al.  A 'Research' Database on Infrastructure Economic Performance , 2005 .

[13]  Christophe Kamps.  Is There a Lack of Public Capital in the European Union? , 2005 .

[14]  A. Tansel,et al.  The role of macroeconomic instability in public and private capital accumulation and growth: the case of Turkey 1963–1999 , 2005 .

[15]  P. Narayan.  Do public investments crowd out private investments? Fresh evidence from Fiji , 2004 .

[16]  E. Mamatzakis,et al.  The impact of public Iinfrastructure on the productivity of the Chilian economy , 2004 .

[17]  Christophe Kamps.  New Estimates of Government Net Capital Stocks for 22 OECD Countries 1960-2001 , 2004, SSRN Electronic Journal.

[18]  Pantelis Kalaitzidakis,et al.  On the macroeconomic implications of maintenance in public capital , 2004 .

[19]  W. Buiter,et al.  Patching up the Pact , 2004 .

[20]  J. Albala-Bertrand.  Can the Composition of Capital Constrain Potential Output? A Gap Approach , 2004 .

[21]  F. Giavazzi,et al.  Improving the Sgp Through a Proper Accounting of Public Investment , 2004 .

[22]  Andreas Stephan.  Assessing the contribution of public capital to private production: Evidence from the German manufacturing sector , 2003 .

[23]  Felix K. Rioja.  Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure , 2003 .

[24]  J. Falkinger,et al.  The Role of Public Infrastructure for Firm Location and International Outsourcing , 2003, SSRN Electronic Journal.

[25]  Manuel Artís,et al.  On the effectiveness of private and public capital , 2003 .

[26]  A. Pereira,et al.  Spillover effects of public capital formation: evidence from the Spanish regions , 2003 .

[27]  A. Pereira,et al.  On the Impact of Public Investment On the Performance of U.S. Industries , 2003 .

[28]  Andreas Stephan,et al.  The Contribution of Local Public Infrastructure to Private Productivity and its Political Economy: Evidence from a Panel of Large German Cities , 2002 .

[29]  R. Reinikka,et al.  Coping with poor public capital , 2002 .

[30]  L. Serven,et al.  The Output Cost of Latin America’s Infrastructure Gap , 2002 .

[31]  G. Voss.  Public and private investment in the United States and Canada , 2002 .

[32]  Olivier Cadot,et al.  Contribution to Productivity or Pork Barrel? : The Two Faces of Infrastructure Investment , 2002 .

[33]  M. Murgui,et al.  The Effect of Public Infrastructure on the Private Productive Sector of Spanish Regions , 2002 .

[34]  N. Laopodis.  Effects of government spending on private investment , 2001 .

[35]  Etsuro Shioji,et al.  Public Capital and Economic Growth: A Convergence Approach , 2001 .

[36]  Stephen S. Everhart.  Trends in private investment in developing countries - statistics for 1970-2000 and the impact on private investment of corruption and the quality of public investment , 2001 .

[37]  Nigel J. Miller,et al.  On the optimality of public capital for long-run economic growth: evidence from panel data , 2001 .

[38]  S. Mittnik,et al.  Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries , 2001 .

[39]  A. Pereira,et al.  Infrastructures and private sector performance in Spain , 2001 .

[40]  C. Seung,et al.  The Effects of Infrastructure Investment: A Two-Sector Dynamic Computable General Equilibrium Analysis for Ohio , 2001 .

[41]  E. Mamatzakis,et al.  The Impact of Public Infrastructure on the Productivity of the Chilean Economy , 2001 .

[42]  Alfredo M. Pereira.  On the Effects of Public Investment on Private Investment: What Crowds in What? , 2001 .

[43]  B. Goodwin,et al.  Determinants of private investment: a cross-regional empirical investigation , 2000 .

[44]  Eliana La Ferrara,et al.  TFP, Costs, and Public Infrastructure: An Equivocal Relationship , 2000 .

[45]  R. Dhumale.  Public Investment in the Middle East and North Africa: Towards Fiscal Efficiency , 2000 .

[46]  D. Aschauer.  Do states optimize? Public capital and economic growth , 2000 .

[47]  A. Pereira.  Is All Public Capital Created Equal? , 2000, Review of Economics and Statistics.

[48]  Maria Jesus Delgado Rodriguez,et al.  PUBLIC PRODUCTIVE INFRASTRUCTURE AND ECONOMIC GROWTH , 2000 .

[49]  Panicos O. Demetriades,et al.  Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economies , 2000 .

[50]  N. Apergis.  Public and Private Investments in Greece: Complementary or Substitute ‘Goods’? , 2000 .

[51]  Miguel Ramírez.  The impact of public investment on private investment spending in Latin America: 1980–95 , 2000 .

[52]  M. Marcellino,et al.  Public Capital and Economic Performance: Evidence from Italy , 2000 .

[53]  A. Haughwout,et al.  Public Infrastructure Investments, Productivity and Welfare in Fixed Geographic Areas , 2000 .

[54]  Jenny E. Ligthart,et al.  Public Capital and Output Growth in Portugal: An Empirical Analysis , 2000, SSRN Electronic Journal.

[55]  L. Röller,et al.  A Political Economy Model of Infrastructure Allocation: An Empirical Assessment , 1999 .

[56]  J. Hansen,et al.  Endogenous schooling and the distribution of the gender wage gap , 1999, SSRN Electronic Journal.

[57]  David Canning,et al.  The Social Rate of Return on Infrastructure Investments , 1999 .

[58]  N. Gemmell,et al.  Fiscal policy and growth: evidence from OECD countries , 1999 .

[59]  H. Esfahani,et al.  Institutions, Infrastructure, and Economic Growth , 1999 .

[60]  A. Pereira,et al.  Public Capital Formation and Regional Development in Spain , 1999 .

[61]  Lawrence R. Klein,et al.  Infrastructure and productivity: a nonlinear approach , 1999 .

[62]  A. Pereira,et al.  Public Capital Accumulation and Private Sector Performance , 1999 .

[63]  Sylvie Charlot,et al.  PUBLIC INFRASTRUCTURE AND ECONOMIC GROWTH IN FRANCE 'S REGIONS , 1999 .

[64]  A. Venables,et al.  The Spatial Economy: Cities, Regions, and International Trade , 1999 .

[65]  J. Temple.  Growth Regressions and What the Textbooks Don't Tell You , 1999 .

[66]  E. Mamatzakis.  Testing for long run relationship between infrastructure and private capital productivity: a time series analysis for the Greek industry , 1999 .

[67]  Jan P. A. M. Jacobs,et al.  Output effects of infrastructure investment in the Netherlands, 1853-1913 , 1999 .

[68]  Jonathan R.W. Temple,et al.  The New Growth Evidence , 1999 .

[69]  Panicos O. Demetriades,et al.  Infrastructure, transport costs and trade , 1999 .

[70]  E. Mamatzakis.  Public Infrastructure, Private Input Demand, and Economic Performance of the Greek Industry , 1999 .

[71]  David Canning,et al.  A database of world stocks of infrastructure for 1950-95 , 1998 .

[72]  Rafael Flores de Frutos,et al.  PUBLIC CAPITAL STOCK AND ECONOMIC GROWTH : AN ANALYSIS OF THE SPANISH ECONOMY , 1998 .

[73]  Raymond G. Batina.  On the Long Run Effects of Public Capital and Disaggregated Public Capital on Aggregate Output , 1998 .

[74]  D. Canning.  A Database of World Infrastructure Stocks, 1950-95 , 1998 .

[75]  Khalifa H. Ghali.  Public investment and private capital formation in a vector error-correction model of growth , 1998 .

[76]  Peter C. B. Phillips,et al.  Impulse response and forecast error variance asymptotics in nonstationary VARs , 1998 .

[77]  B. Sanchez-Robles,et al.  Infrastructure Investment and Growth: Some Empirical Evidence , 1998 .

[78]  John G. Fernald,et al.  Roads to Prosperity?: Assessing the Link Between Public Capital and Productivity , 1997 .

[79]  Janet L. Gamble,et al.  Public Capital and Private Productivity , 1997, Review of Economics and Statistics.

[80]  C. Hulten,et al.  Infrastructure Capital and Economic Growth: How Well You Use it May Be More Important than How Much You Have , 1996 .

[81]  J. Sturm,et al.  Modelling Government Investment and Economic Growth on a Macro Level: A Review , 1996 .

[82]  Anthony J. Venables,et al.  Equilibrium Locations of Vertically Linked Industries , 1996 .

[83]  H. Zou,et al.  The composition of public expenditure and economic growth , 1996 .

[84]  J. Sturm,et al.  Government capital formation: Explaining the decline , 1996 .

[85]  Steven P. Cassou,et al.  A normative analysis of public capital , 1995 .

[86]  M. Wohar,et al.  Public and private investment: Are there causal linkages? , 1995 .

[87]  Douglas Holtz-Eakin,et al.  Scale Economies, Returns to Variety, and the Productivity of Public Infrastructure , 1995 .

[88]  Xavier Vives,et al.  Infrastructure and education as instruments of regional policy: evidence from Spain , 1995 .

[89]  Douglas Holtz-Eakin,et al.  Infrastructure in a Structural Model of Economic Growth , 1994 .

[90]  Helmut Seitz,et al.  The economic benefits of public infrastructure , 1994 .

[91]  P. Evans,et al.  Is government capital productive? Evidence from a panel of seven countries , 1994 .

[92]  William Easterly,et al.  Fiscal Policy and Economic Growth: An Empirical Investigation , 1993 .

[93]  W. Cullison.  Public Investment and Economic Growth , 1993 .

[94]  Alicia Haydock Munnell,et al.  Policy Watch: Infrastructure Investment and Economic Growth , 1992 .

[95]  Douglas Holtz-Eakin,et al.  Public-Sector Capital and the Productivity Puzzle , 1992 .

[96]  Bengt Hansson,et al.  Measuring the Contribution of Public Infrastructure Capital in Sweden , 1991 .

[97]  R. Levine,et al.  A Sensitivity Analysis of Cross-Country Growth Regressions , 1991 .

[98]  Alicia Haydock Munnell,et al.  How Does Public Infrastructure Affect Regional Economic Performance , 1990 .

[99]  R. Barro,et al.  Public Finance in Models of Economic Growth , 1990 .

[100]  David Alan Aschauer,et al.  Does public capital crowd out private capital , 1989 .

[101]  David Alan Aschauer,et al.  IS PUBLIC EXPENDITURE PRODUCTIVE , 1989 .

[102]  R. Barro.  Government Spending in a Simple Model of Endogeneous Growth , 1988, Journal of Political Economy.

[103]  Randall W. Eberts,et al.  Estimating the contribution of urban public infrastructure to regional growth , 1986 .

[104]  Franklin J. Agardy,et al.  Infrastructure and Productivity , 1984 .

[105]  Peter Haggett,et al.  The Spatial Economy , 1978 .

[106]  George C. Bitros.  A Statistical Theory of Expenditures in Capital Maintenance and Repair , 1976, Journal of Political Economy.

[107]  A. H. Cooper-Prichard.  "Mind your P's and Q's" , 1926 .

[108]  Antonio Estache.  Infrastructure: A survey of recent and upcoming issues , 2006 .

[109]  Jeffrey P. Cohen,et al.  Public Infrastructure Investment, Interstate Spatial Spillovers, and Manufacturing Costs , 2004, Review of Economics and Statistics.

[110]  Gerdie Everaert,et al.  Public capital and long-term labour market performance in Belgium , 2004 .

[111]  Andreas Stephan.  Regional Infrastructure Policy and its Impact on Productivity: A Comparison of Germany and France , 2001 .

[112]  张万春.  Mind Your P＇s and Q＇s , 2000 .

[113]  P. Pedroni,et al.  Infrastructure and Long Run Economic Growth , 1999 .

[114]  David Canning,et al.  The Contribution of Infrastructure to Aggregate Output , 1999 .

[115]  Habib Ahmed,et al.  Department of Economics Working Paper Series Crowding-out and Crowding-in Effects of the Components of Government Expenditure , 1999 .

[116]  Ide Kearney,et al.  National Investment Priorities For The Period 2000-2006 , 1999 .

[117]  M. Gárate,et al.  Public Capital, Regional Productivity and Spatial Spillovers , 1998 .

[118]  R. Solow,et al.  An economists' Manifesto on unemployment in the European Union , 1998 .

[119]  X. Sala-i-Martin,et al.  I Just Ran Two Million Regressions , 1997 .

[120]  W. Crowder,et al.  Balanced growth and public capital: an empirical analysis , 1997 .

[121]  J. Sturm,et al.  IS PUBLIC-EXPENDITURE REALLY PRODUCTIVE - NEW EVIDENCE FOR THE USA AND THE NETHERLANDS , 1995 .

[122]  E. Gramlich,et al.  Infrastructure Investment: A Review Essay , 1994 .

[123]  Mary G. Finn.  Is All Government Capital Productive? , 1993 .

[124]  John P. Martin,et al.  CONTROLLING GOVERNMENT SPENDING AND DEFICITS: TRENDS IN THE 1980s AND PROSPECTS FOR THE 1990s , 1991 .

[125]  Robert Ford,et al.  Infrastructure and Private-Sector Productivity , 1991 .

[126]  J. Tatom,et al.  Public capital and private sector performance , 1991 .

[127]  J. Stock,et al.  INFERENCE IN LINEAR TIME SERIES MODELS WITH SOME UNIT ROOTS , 1990 .

[128]  Alicia Haydock Munnell,et al.  Why has productivity growth declined? Productivity and public investment , 1990 .

[129]  R. King,et al.  Fiscal Policy in General Equilibrium , 1990 .

[130]  Edward E. Leamer,et al.  Let's Take the Con Out of Econometrics , 1983 .

[131]  M. Yamamoto.  Fiscal Policy and Economic Growth , 1968 .

[132]  Gerdie Everaert,et al.  Balanced growth and public capital: an empirical analysis with I(2)-trends in capital stock data. , 2003 .