Is public capital productive in Europe?

Gwenaelle Poilon () and Jerome Creel
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Gwenaelle Poilon: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This paper addresses the issue of whether and by how much public investment or public capital can increase GDP. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A vector autoregressive (VAR) model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a 'golden rule of public finance' in the European Monetary Union is legitimate in this respect.

Keywords: public capital; public investment; VAR; panel data; European countries (search for similar items in EconPapers)
Date: 2008-11
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03416671
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Published in International Review of Applied Economics, 2008, 22 (6), pp.673 - 691. ⟨10.1080/02692170802407577⟩

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Related works:
Journal Article: Is public capital productive in Europe? (2008)
Working Paper: Is public capital productive in Europe? (2008)
Working Paper: Is public capital productive in Europe? (2006)
Working Paper: Is Public Capital Productive in Europe? (2006)
Working Paper: Is Public Capital Productive in Europe? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03416671

DOI: 10.1080/02692170802407577

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