TFP, Costs, and Public Infrastructure: An Equivocal Relationship

IGIER Working Paper No. 176

36 Pages Posted: 11 Mar 2001

See all articles by Eliana La Ferrara

Eliana La Ferrara

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); Centre for Economic Policy Research (CEPR)

Massimiliano Giuseppe Marcellino

European University Institute; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2000

Abstract

This paper studies the impact of public infrastructure on economic performance. We employ three different methodologies to estimate the returns to public investment. First, we relate growth in total factor productivity to accumulation of public capital. Second, we assess the role of public capital as an input to production. Third, we evaluate the reduction in costs that can be attributed to the presence of public infrastructure. Using regional data for Italy, we find that the aggregate impact of public capital is positive and significant under the first approach, slightly negative under the second, and virtually zero under the third. More coherent results obtain when disaggregating by geographical area and time period: under all three approaches, the effectiveness of public investment seems to be increasing over time and to be higher in Central and Southern regions than in Northern ones.

Keywords: infrastructures, TFP, growth, costs

JEL Classification: H54, O47, C50

Suggested Citation

La Ferrara, Eliana and Marcellino, Massimiliano, TFP, Costs, and Public Infrastructure: An Equivocal Relationship (October 2000). IGIER Working Paper No. 176. Available at SSRN: https://ssrn.com/abstract=262511 or http://dx.doi.org/10.2139/ssrn.262511

Eliana La Ferrara (Contact Author)

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

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+39 02 5836 3328 (Phone)
+39 02 5836 3302 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Massimiliano Marcellino

European University Institute ( email )

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Firenze (Florence), Tuscany 50014
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

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50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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