Regional Productivity Variation and the Impact of Public Capital Stock : An Analysis with Spatial Interaction, with Reference to Spain

In this paper we examine whether variations in the level of public capital across Spain‟s Provinces affected productivity levels over the period 1996-2005. The analysis is motivated by contemporary urban economics theory, involving a production function for the competitive sector of the economy („industry‟) which includes the level of composite services derived from „service‟ firms under monopolistic competition. The outcome is potentially increasing returns to scale resulting from pecuniary externalities deriving from internal increasing returns in the monopolistic competition sector. We extend the production function by also making (log) labour efficiency a function of (log) total public capital stock and (log) human capital stock, leading to a simple and empirically tractable reduced form linking productivity level to density of employment, human capital and public capital stock. The model is further extended to include technological externalities or spillovers across provinces. Using panel data methodology, we find significant elasticities for total capital stock and for human capital stock, and a significant impact for employment density. The finding that the effect of public capital is significantly different from zero, indicating that it has a direct effect even after controlling for employment density, is contrary to some of the earlier research findings which leave the question of the impact of public capital unresolved

Regional macroeconomic outcomes under alternative arrangements for the financing of public infrastructure

We use a dynamic multi-regional CGE model (MMRF) to evaluate the regional macroeconomic consequences of four methods of financing a program of regional government infrastructure provision. The methods are developer charges, debt, payroll tax and residential rates. We demonstrate that the net gains from a program of public infrastructure development are quite sensitive to the chosen financing means. The net gains are greatest under rates and debt financing, and least under developer charges and payroll tax financing

Promoting regional economic growth in Greece by investing in public infrastructure

The role of public infrastructure capital in the development process, either at national or at regional levels, was a relatively neglected area of research until recently. The innovatory work of Aschauer, and the ensuing debate between himself, Munnell, and Holtz-Eakin regarding the role of infrastructure in the development process in the USA, has spawned much interest in the issue. The authors aim to assess the impact of public capital on Greek manufacturing industries, especially focused at the regional scale. Capital stocks were estimated for the private and public sectors and Cobb-Douglas production functions were used in the analytical framework. The results suggest that the role of private capital in economic development in recent times has been marginal, as private investment has declined, whereas the role of labour and public capital has been both positive and significant. The authors segregate public capital into 'productive' and 'social' infrastructure; they argue that when productive infrastructure makes a positive contribution to production output, the impact of social infrastructure is insignificant and/or negative in most cases. The network effects of infrastructure are also estimated