A0787
Title: New approach to estimating the productivity of public capital: Evidence from 22 OECD countries
Authors: Hiroshi Morita - Tokyo Institute of Technology (Japan) [presenting]
Abstract: Investigating the productivity of public capital is a long-standing issue in one strand of macroeconomic literature. A new approach is developed to estimate the output elasticity of public capital in a vector autoregressive model with identification restrictions derived from the theoretical model. The empirical analysis of 22 OECD countries for the period 1960- 2019 reveals that public capital accumulation has a positive effect on GDP both in the short-run and long-run horizons in all countries, supporting both demand-stimulating and growth-enhancing 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, it can be concluded that the proposed methodology is valid for studying public capital productivity.
