WHAT HAVE WE LEARNED FROM THREE DECADES OF RESEARCH ON THE PRODUCTIVITY OF PUBLIC CAPITAL?

• Published in: Journal of economic surveys Vol. 28; no. 5; pp. 889 - 916
• Main Authors: Bom, Pedro R.D., Ligthart, Jenny E.
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01.12.2014
• Subjects: Capital; Central government; Economic theory; Elasticity of substitution; Empirical research; Global economy; Infrastructure; International; Meta-analysis; Output; Productivity; Public capital; Public investment; Publication bias; Regression analysis; Studies
• ISSN: 0950-0804; 1467-6419
• DOI: 10.1111/joes.12037

The last three decades have witnessed a great deal of research effort devoted to measuring the private output elasticity of public capital. The wide range of available estimates have precluded any consensus so far, however. This paper reconciles the empirical findings of the literature by quantitatively analyzing a sample of 578 estimates collected from 68 studies for the 1983–2008 period. Using meta‐regression analysis, we show how study design characteristics and publication bias can explain a large fraction of the variation across estimates. We find a short‐run output elasticity of public capital supplied at the central government level of 0.083, which increases to 0.122 in the long run. If, in addition, only core infrastructure at a regional/local level of government is considered, these estimates are almost doubled. The average output elasticity of public capital amounts to 0.106. Our results suggest that public capital is undersupplied in OECD economies.