Scale Economies, Returns to Variety, and the Productivity of Public Infrastructure / Douglas Holtz-Eakin, Mary E. Lovely.

Format:

Book

Author/Creator:

Holtz-Eakin, Douglas.

Contributor:

National Bureau of Economic Research.

Lovely, Mary E.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5295.

NBER working paper series no. w5295

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1995.

Summary:

We examine the productivity of public infrastructure in a general equilibrium context. In our model, infrastructure lowers costs in a manufacturing sector characterized by both firm-level returns to scale and industry-level external returns to variety. Infrastructure alters factor prices, intermediate prices and the allocation of factors across sectors. The effect on manufacturing or aggregate output, however, is indeterminate. In particular, our theory suggests that the degree of monopoly power influences public capital's productivity effect. We test the model using state-level panel data. We confirm the absence of direct effects on output, but find suggestive evidence of a positive impact of public capital on manufacturing variety as measured by the number of manufacturing establishments. These results indicate the need for future research on potentially important indirect channels by which public capital affects manufacturing productivity.

Notes:

Print version record

October 1995.