THE TREND BEHAVIOR OF PUBLIC CAPITAL EXPENDITURE ON HIGHWAYS IN THE UNITED-STATES - DID THE GROWTH-RATE OF PUBLIC-EXPENDITURE EXPERIENCE A DECLINE

This paper tests the unit root hypothesis in the log level of the capi tal outlays on highways in the U.S. during the postwar period using so me newly developed time series methods of analysis. The evidence for a structural break in the trend function in the total capital outlays i s found. rejecting the unit root hypothesis. The analysis uses annual data from 1956 to 1989. The timing of the break is treated as an unkno wn parameter. The results of this paper call into question a generally held belief that the total capital expenditure on new highways has ex perienced a decline in its growth rate. The evidence of trend stationa rity of the capital outlays should be of interest since the validity o f many econometric tests and procedures critically depends upon this p roperty.