Estimating the Productivity of Public Infrastructure using Maximum Entropy Econometrics

Jorge Rodriguez-Vález, Antonio Alvarez, Carlos Arias () and Esteban Fernández Vázquez ()

No 2005/04, Efficiency Series Papers from University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG)

Abstract: The empirical analysis of public infrastructure productivity has been limited by several econometric problems. These problems are probably the cause of the great variability in results reported in the literature. One of these econometric problems is the existence of multicollinearity when infrastructure is included as an input in a production function. In this paper, we propose to deal with multicollinearity by using prior information on parameter values. For this purpose, we explore the use of maximum entropy econometrics to estimate the parameters of a regional production function in Spain. Our results show that infrastructure plays an important role on production. This result is not affected by quite large changes on prior information on parameter values.

Keywords: Infraestructures; maximum entropy; multicollineairity; productivity (search for similar items in EconPapers)
Pages: 18
Date: 2005
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