NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Scale Economies, Returns to Variety, and the Productivity of Public Infrastructure

Douglas Holtz-Eakin, Mary E. Lovely

NBER Working Paper No. 5295
Issued in October 1995
NBER Program(s):   PE

We examine the productivity of public infrastructure in a general equilibrium context. In our model, infrastructure lowers costs in a manufacturing sector characterized by both firm-level returns to scale and industry-level external returns to variety. Infrastructure alters factor prices, intermediate prices and the allocation of factors across sectors. The effect on manufacturing or aggregate output, however, is indeterminate. In particular, our theory suggests that the degree of monopoly power influences public capital's productivity effect. We test the model using state-level panel data. We confirm the absence of direct effects on output, but find suggestive evidence of a positive impact of public capital on manufacturing variety as measured by the number of manufacturing establishments. These results indicate the need for future research on potentially important indirect channels by which public capital affects manufacturing productivity.

download in pdf format
   (296 K)

email paper

This paper is available as PDF (296 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5295

Published: Regional Science and Urban Economics, Vol. 26. 1996, pp. 105-123 citation courtesy of

Users who downloaded this paper also downloaded these:
Holtz-Eakin and Schwartz w4824 Infrastructure in a Structural Model of Economic Growth
Mark and Sul t0287 Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand
Mishkin w6122 Strategies for Controlling Inflation
Holtz-Eakin and Schwartz w5004 Spatial Productivity Spillovers from Public Infrastructure: Evidence from State Highways
Bekaert, Harvey, and Lundblad w7763 Emerging Equity Markets and Economic Development
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us