Opening the black box: aggregate implications of public investment heterogeneity

Henrique S. Basso, Myroslav Pidkuyko and Omar Rachedi
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Henrique S. Basso: BANCO DE ESPAÑA

No 2501, Working Papers from Banco de España

Abstract: With multiple types of public capital, the aggregate implications of public investment crucially depend on the sum of the output elasticities of public capital across types. Abstracting from this heterogeneity and considering a single homogeneous type underestimates the effects of public investment. This is because the output elasticity of aggregate public capital is biased: it does not coincide with the sum of output elasticities of the different types. A quantitative model with public investment in equipment, structures, and intangibles implies substantial negative bias. Heterogeneity in public investment roughly doubles the long-run fiscal multiplier and optimal scale of public investment.

Keywords: public capital; intellectual property products; equipment; structures; fiscal multiplier (search for similar items in EconPapers)
JEL-codes: E22 E62 H54 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2024-01
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2501

DOI: 10.53479/38897

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