HIGHWAY INFRASTRUCTURE CAPITAL AND PRODUCTIVITY GROWTH - EVIDENCE FROM THE CANADIAN GOODS-PRODUCING SECTOR

This paper investigates the role of highway capital in Canadian goods production. Province-wide production functions using both Cobb-Douglas and translog functional forms with highway capital. private capital a nd labour as the three inputs are estimated. Production functions are estimated using standard techniques to control for unobserved province and time specific characteristics based on pooled cross-section data for 10 Canadian provinces over the period 1961-1994. The issue of nons tationarity data is recognized and appropriate adjustment is made. Out put elasticities of highway capital are estimated over five years for each province. The results indicate that generally highway capital has a positive contribution on provincial floods-producing output. This r elationship holds for various specifications of the error structure an d functional forms. Highway capital and private capital are found to b e substitutes. Highway capital and labour are found to be complements. The size and significance of the estimates vary depending on specific ations of the error structure end on the use of functional forms.