Public Capital in the 21st Century: As Productive as Ever?

38 Pages Posted: 25 Jan 2017

See all articles by Jasper de Jong

Jasper de Jong

De Nederlandsche Bank

M. Ferdinandusse

European Central Bank (ECB)

Josip Funda


Date Written: January 18, 2017


The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for growth perspectives? Our main objective is to find out whether the importance of public capital for long run output growth has changed in recent years. We also aim to provide information on the relevance of international spillovers of public capital. To these ends, we expand time series on public capital stocks for 20 OECD countries as constructed by Kamps (2006) and estimate country-specific recursive VARs. Results show that the effect of public capital shocks on economic growth has not increased in general, although results differ widely between countries. This suggests that the current level of public investments generally does not pose an immediate threat to potential output. Of course, this could change if low investment levels are sustained for a long time. We furthermore provide some tentative evidence of positive spillovers of public capital shocks between European countries.

Keywords: Public capital stock, economic growth, spillovers

JEL Classification: E22, E62, H54

Suggested Citation

de Jong, Jasper and Ferdinandusse, M. and Funda, Josip, Public Capital in the 21st Century: As Productive as Ever? (January 18, 2017). De Nederlandsche Bank Working Paper No. 542, Available at SSRN: or

Jasper de Jong (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB

M. Ferdinandusse

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Josip Funda

Independent ( email )

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