PUBLIC INFRASTRUCTURE, PRIVATE INPUT DEMAND, AND ECONOMIC-PERFORMANCEIN NEW-ENGLAND MANUFACTURING

Much of the current debate on the economic performance impacts of publ ic infrastructure investment relates to the input-specific effects of such investment. In this article we explore these impacts by evaluatin g substitution patterns affecting private input use in New England man ufacturing. Using a cost-based methodology, we find that, in the short run, public capital expenditures provide cost-saving benefits that ex ceed the associated investment costs due to substitutability between p ublic capital and private inputs. Over time, however, stimulating inve stment in private capital increases economic performance more effectiv ely than public capital expenditures alone and in fact reduces the cos t incentive for such expenditures. In addition, growth in output motiv ated by infrastructure investment increases employment opportunities b ecause this growth overrides short-run substitutability.