Premium
The Effect of Public Infrastructure on Cost Structure and Performance of Chinese Provinces *
Author(s) -
Yu Chen,
Mamuneas Theofanis P.
Publication year - 2021
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12229
Subject(s) - public infrastructure , productivity , economics , private capital , investment (military) , rate of return , capital (architecture) , public capital , private sector , capital deepening , total factor productivity , labour economics , monetary economics , production (economics) , finance , public investment , capital formation , macroeconomics , economic growth , human capital , financial capital , history , archaeology , political science , law , politics
This paper estimates a translog cost function for 29 Chinese provinces between 1979 and 2018. The results imply that investment in public infrastructure reduces costs in all provinces. Comparing the estimated rate of return to infrastructure with the rate of return to private capital, our results indicate underinvestment for the initial period after the economic reforms; however, after 2010 our results show overinvestment in infrastructure. Infrastructure capital is a substitute input to labor, private capital and intermediate inputs. Finally, public infrastructure growth contributes positively to labor and total factor productivity growth, but the effect is small. The growth of private capital and intermediate inputs are the most important factors that boost the growth of labor productivity.