Intertemporal output and employment effects of public infrastructure capital: Evidence from 12 OECD economies

This paper utilises an intertemporal optimisation framework to study the ef fects of public infrastructure capital on output supply and input demands i n 12 OECD countries. We find that in all 12 countries: (i) public capital h as positive long-run effects on both output supply and input demands (ii) i ts mean short-run rates of return are fairly low, while the corresponding l ong-run rates are much higher but declining over time. These findings under score important under-investment, gaps in infrastructure during the 1970s a nd 1980s; these gaps however narrowed down significantly (in a few cases co mpletely) by the early 1990s.