State Infrastructure and Productive Performance
Catherine J. Morrison Paul
University of California, Davis - Department of Agricultural and Resource Economics; National Bureau of Economic Research (NBER); University of Hartford - Barney School of Business
Amy Ellen Schwartz
New York University (NYU) - Institute for Education and Social Policy; National Bureau of Economic Research (NBER); New York University (NYU) - Robert F. Wagner Graduate School of Public Service
AMERICAN ECONOMIC REVIEW, Vol. 86, No. 5, December 1996
Recent research on productivity growth has focused on public infrastructure and its impact on economic growth and productivity. We construct a model of firms' technology and behavior, taking advantage of the analytical framework provided in the cost-function-based applied production-theory literature, and apply it to state-level data for U.S. manufacturing. We find that infrastructure investment provides a significant return to manufacturing firms and augments productivity growth. The net benefits of infrastructure investment may or may not be positive, depending upon the social costs of infrastructure investment and the relative growth rates of output and infrastructure.
JEL Classification: H54, H72, O47Accepted Paper Series
Date posted: February 25, 1997
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