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The Effect of Public Capital in State-Level Production Functions Reconsidered

Teresa Garcia-Milà, Therese J. McGuire and Robert H. Porter
The Review of Economics and Statistics
Vol. 78, No. 1 (Feb., 1996), pp. 177-180
Published by: The MIT Press
DOI: 10.2307/2109857
Stable URL: http://www.jstor.org/stable/2109857
Page Count: 4
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The Effect of Public Capital in State-Level Production Functions Reconsidered
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Abstract

Using a panel data set for the 48 contiguous states from 1970 to 1983, several estimates are provided of a Cobb-Douglas production function with three types of public capital as inputs. Various specification tests are systematically applied to test for both random and fixed state effects, nonstationarity, endogeneity of the private inputs, and measurement error. In the preferred specification, which is first differences with fixed state effects, the public capital variables are not significant, while the fixed state effects and private input variables are significant.

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