Public infrastructure as a determinant of productive performance

Public infrastructure investment is an essential part of China's regional development policy. This raises the question to what degree public infrastructure capital matters for labor productivity in China, at the regional level as well as over time. This paper estimates cost function models of production in industrial enterprises, using province-level data from 1993 to 2003. The estimated rate of return in industrial production is 23-25%, and on average public infrastructure contributes 2-3% points to the growth in labor productivity among these enterprises.