THE EFFECT OF PUBLIC CAPITAL LN STATE-LEVEL PRODUCTION-FUNCTIONS RECONSIDERED

Using a panel data set for the 48 contiguous states from 1970 to 1983, several estimates are provided of a Cobb-Douglas production function with three types of public capital as inputs. Various specification te sts are systematically applied to test for both random and fixed state effects, nonstationarity, endogeneity of the private inputs, and meas urement error. In the preferred specification, which is first differen ces with fixed state effects, the public capital variables are not sig nificant, while the fixed state effects and private input variables ar e significant.