Public capital accumulation and private sector performances

This paper analyzes the effects of public capital on private sector variabl es in a vector auto-regressive framework. Empirical results suggest first, that public capital follows a policy rule that relates public capital posit ively with lagged output and negatively with lagged employment. Second, pub lic capital crowds in private capital while the long-term effects on employ ment are only marginally positive. Finally, a one-dollar increase in public capital increases private output in the long term by 65 cents. Accordingly , while public capital is productive its effects on output are much lower t han claimed in the previous literature. (C) 1999 Academic Press.