An empirical study on public capital spillovers from the USA to Canada

The effect of public capital on private sector productivity has received mu ch attention in the literature. The impact of an adjacent country's public capital on domestic productivity has, however, not been previously examined . This paper attempts to fill this gap by examining the possibility of such spillovers from the USA to Canada. Due to close proximity of both countrie s, the hypothesis of the paper is that these spillovers are important. A pr oduction function model introduces US public capital as an exogenous variab le and tests for its significance. The results indicate positive spillovers from the USA public capital to Canadian productivity.