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Public-Sector Capital and the Productivity Puzzle
The Review of Economics and Statistics
Vol. 76, No. 1 (Feb., 1994), pp. 12-21
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/2109822
Page Count: 10
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A number of studies have suggested a quantitatively important relationship between public-sector capital accumulation and private sector productivity, with the most compelling evidence derived from analyses of state-level data. Estimates herein of production functions that use standard techniques to control for unobserved, state-specific characteristics, however, reveal essentially no role for public-sector capital in affecting private sector productivity. Only estimates of state production functions that do not include such controls find substantial productivity impacts. This result reconciles existing econometric estimates with the findings of Hulten and Schwab based on growth accounting techniques, as such techniques effectively control for state-specific effects. Region-level estimates are essentially identical to those from state data, suggesting no quantitatively important spillover effects across states.
The Review of Economics and Statistics © 1994 The MIT Press