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Estimating production functions for the US states: the role of public and human capital

Nikos Benos (), Nikolaos Mylonidis () and Stefania Zotou ()
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Stefania Zotou: University of Ioannina

Empirical Economics, 2017, vol. 52, issue 2, 691-721

Abstract: Abstract This paper estimates production functions for the 48 contiguous U.S. states over the 1970–2000 period employing recently developed panel estimators that tackle simultaneously parameter heterogeneity, cross-sectional dependence and non-stationarity. The findings suggest that labor, private capital and, when controlling for cross-sectional dependence, average schooling years exert a positive and significant effect on state income. In contrast, the income effect of public capital stock is negative. The state-specific coefficients indicate that this effect likely stems from the negative elasticity of income with respect to public capital in the states located primarily in the Snow Belt region.

Keywords: Production function; Cross-sectional dependence; Panel analysis; Public capital; Human capital (search for similar items in EconPapers)
JEL-codes: R11 C23 H54 I25 (search for similar items in EconPapers)
Date: 2017
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