New Approach to Estimating the Productivity of Public Capital: Evidence from 22 OECD Countries

Hiroshi Morita

No HIAS-E-141, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: Investigating the productivity of public capital is a long-standing issue in one strand of macroeconomic literature. This study develops a new approach to estimate the output elasticity of public capital using a vector autoregressive (VAR) model with identification restrictions derived from a theoretical model. Our empirical analysis of 22 OECD countries for the period 1960–2019 reveals that public capital accumulation has a positive effect on GDP in both the short- and longrun horizons in all countries, supporting both demand-stimulating and growthenhancing effects. Furthermore, the estimated output elasticity of public capital lies within a reasonable range, between 0 and 0.5, and, as in the literature, shows substantial differences across countries. Therefore, the proposed methodology is valid for studying public capital productivity.

Keywords: Public capital; Hierarchical panel VAR model; Max share identification (search for similar items in EconPapers)
JEL-codes: C32 C33 E62 H54 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2024-10-30
New Economics Papers: this item is included in nep-eff and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-141

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