A NORMATIVE ANALYSIS OF PUBLIC CAPITAL

A normative analysis of short-term public capital investments is carri ed out using cost benefit analysis. This cost benefit approach explici tly incorporates the durability of capital into the computation and th us includes an aspect of public capital omitted from previous studies which focus on productivity. Estimation methods used elsewhere have be en improved by properly handling several concerns that have been raise d. In addition, this behavioural model yields many structural equation s suitable for estimation which results in highly efficient parameter estimates. Although a small elasticity is found for public capital, th e benefit is greater than the cost.