Format of Original
College of Business Administration, University of Nebraska, Lincoln
Quarterly Journal of Business and Economics
Original Item ID
Shelves: HB 1 .N4 Mem Periodicals
This paper examines the relationship between public capital and private sector productivity in the context of a dynamic framework that distinguishes long-run equilibrium relations from short-run disequilibrium values. Using annual data covering the 1948-1987 period we find that there is a stable long-run relationship among private sector productivity, private inputs of capital and labor, and core infrastructure capital. Public capital exerts a positive influence on private sector productivity along this path, although the effect is statistically significant only at low levels of confidence. On the other hand, there appears to be no discernible effect on productivity by core infrastructure capital in the short run. We also find that while public capital is weakly exogenous for the parameters of the long-run relation, it is not strongly exogenous, as it is Granger-caused by private sector productivity.