Diagnosing The Productivity Effect of Public Capital in the Private Sector (original) (raw)

The paper examines the relationship between public capital and private sector productivity, highlighting the historical decline in productivity growth correlated with reductions in public capital from the mid-1960s to the early 1980s. Utilizing both cost and profit function models, it addresses previous research controversies, particularly the impact of price endogeneity and nonstationarity in time series data. The findings suggest that while public capital may influence productivity, the effects are not uniform across subsectors, necessitating careful consideration in policy-making.