Diagnosing The Productivity Effect of Public Capital in the Private Sector (original) (raw)
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Research efforts in the early 1990s uncovered an apparent relationship between rates of productivity growth and levels of investment in core infrastructure by the public sector in developed economies. If valid, these findings account for most of the widely reported slowdown in U.S. rates of productivity growth since 1970s, and lend a measure of intrinsic worth to government intervention in the national economy more fundamental than a merely countercyclical role. This review (a) outlines the central results of the dozens of research efforts mounted since then that attempt to explain the U.S. productivity slowdown; (b) retraces the findings of the researchers most noted for their linking of infrastructure investment with productivity changes; (c) recapitulates the criticisms to which they have been subjected in recent months; and (d) summarizes the main issues that divide protagonists and antagonists in this arena. Finally, I introduce a set of empirical and theoretical issues that bear heavily on these issues, but have not been given adequate attention by researchers on either side of the debate.
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On Ihe other hand, the re appears to ~ 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 paramete rs of the long· run relation, it is· not strongly exogenous, as it is Granger-caused by privale sector productivity.
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This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2 ECO/WKP(2019)43 Unclassified OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works. Comments on Working Papers are welcomed, and may be sent to the Economics Department, OECD,
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The measurement of productivity change (or difference) is usually based on models that make use of strong assumptions such as competitive behavior and constant returns to scale. This survey discusses the basics of productivity measurement and shows that one can dispense with most if not all of the usual, neoclassical assumptions. By virtue of its structural features, the measurement model is appli-cable to individual establishments and aggregates such as industries, sectors, or economies. 1.