PUBLIC INFRASTRUCTURE AND ECONOMIC-GROWTH - TIME-SERIES PROPERTIES AND EVIDENCE

We examine whether economic growth is generated endogenously or exogen ously, and estimate the externality effects due to private and public capital respectively. Applying a multivariate stochastic cointegration method to US data, we find that the evidence is unfavourable to the e ndogenous growth model with public infrastructure. The estimated elast icity of output with respect to public capital is 0.11, smaller than t ypical values obtained in single-equation regression studies, On the o ther hand, if the shave of capital income is taken to be one-third, th en the spillover effect due to private capital is positive but may be as low as 0.10.