public infrastructure

Numerous empirical studies have investigated the contribution of public infrastructure (the stock of publicly provided physical capital) to private economic productivity and growth. Using aggregate time-series data to estimate a production function with private capital, labour and public capital as inputs, the authors found substantial elasticities of private output with respect to public infrastructure. The result did not withstand scrutiny. Studies using disaggregated data (by region and industry), employing econometric diagnostics testing for nonstationarity, fixed effects and endogeneity, and using natural-experiment techniques found public infrastructure’s contribution to economic growth to be minor.