Infrastructures and private sector performance in Spain

This article analyzes the effects of public capital formation on private se ctor performance in Spain. The analysis is conducted both at the aggregate level and the disaggregated sectoral level. The empirical results are based on VAR estimates using private output, employment, and investment, as well as public investment. This approach follows the conceptual argument that t he analysis of the effects of public capital accumulation requires the cons ideration of dynamic feedback effects among the relevant variables. Estimat ion results at the aggregate level indicate that public capital crowds in p rivate inputs and affects private output positively. In particular, I peset a invested in public capital generates in the long term 5.5 pesetas of priv ate output. The positive effects of public capital formation can also be de tected, although to different degrees, at the disaggregated level. The sect or of services seems to gain the most in absolute terms. In relative terms, however, all sectors, except for agriculture, benefit in some way. The sec tor of services captures a disproportionate share of the benefits in terms of private capital formation while manufacturing and construction benefit d isproportionately in terms of employment and output. These results also imp ly that public capital formation makes the sector of services more capital- intensive and the manufacturing sector more labor-intensive. (C) 2001 Socie ty for Policy Modeling. Published by Elsevier Science Inc.