Output and Employment Effects of Public Capital
Author: DAVID ALAN ASCHAUER
Published in PFM, Vol. 1 No. 2
This paper develops a two-equation model linking public capital to
employment and output growth. The basic innovation is that the
relationship between public capital and economic growth is non-linear,
which allows an estimate of the growth-maximizing level of public capital
(relative to private capital). The model is empirically implemented using a
variety of estimation procedures with data for the 48 contiguous United
States over the period from 1970 to 1990. Some of the more significant
findings of the paper include: generally positive effects of public capital on
economic growth (both in terms of output and employment); an estimated
value of the growth-maximizing public capital stock between 50 and 70
percent of the private capital stock; negative effects of public debt and taxes
on economic growth; somewhat higher growth effects from public capital in
the 1980s than the 1970s; and somewhat larger growth effects from public
capital in the Snowbelt than in the Sunbelt.
Subscribers: Login to read this article
Guests: Subscribe to PFM, or purchase individual article access for $10.
The article is not available for automatic download. We will email the article to you as a PDF file upon receiving your payment, typically within 24 hours.