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Public Infrastructure and Economic Growth: Time‐Series Properties and Evidence *
Author(s) -
LAU SAUHIM PAUL,
SIN CHORYIU
Publication year - 1997
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1997.tb00986.x
Subject(s) - economics , public capital , spillover effect , externality , output elasticity , endogenous growth theory , private capital , public infrastructure , capital (architecture) , time series , capital deepening , econometrics , multivariate statistics , public economics , microeconomics , capital formation , human capital , financial capital , economic growth , public investment , public welfare , profit (economics) , mathematics , production (economics) , statistics , archaeology , political science , law , history
We examine whether economic growth is generated endoge‐nously or exogenously, and estimate the externality effects due to private and public capital respectively. Applying a multivariate stochastic coinlegration method to US data, we find that the evidence is unfavourable to the endogenous growth model with public infrastructure. The estimated elasticity of output with respect to public capital is 0.11, smaller than typical values obtained in single‐equation regression studies. On the other hand, if the share of capital income is taken to be one‐third, then the spillover effect due to private capital is positive but may be as low as 0.10.