Abstract
We undertake a sensitivity analysis of the productivity of public capital under the aggregate production function approach. Several proxies are used for the private inputs and for public capital, several dummy variables are included to adjust for energy price shocks, newly revised data is studied, and Stock and Watson’s dynamic OLS estimator is used. Our main results are that the productivity of public capital depends critically on the proxies used, the effects are typically smaller than the early estimates, and omitting the oil price shocks introduces significant upward bias in the measured productivity of public capital.
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The author is indebted to Dan Hamilton, Hiro Ihori, Steve Perez, two anonymous referees, and the editor for their helpful comments on earlier versions of this paper. Of course, the usual disclaimer applies.
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Batina, R.G. (2000). On the long run effect of public capital on aggregate output: Estimation and sensitivity analysis. In: Boadway, R., Raj, B. (eds) Advances in Public Economics. Studies in Empirical Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-57654-6_9
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DOI: https://doi.org/10.1007/978-3-642-57654-6_9
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-642-63324-9
Online ISBN: 978-3-642-57654-6
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