TY - JOUR
T1 - Scale economies, returns to variety, and the productivity of public infrastructure
AU - Holtz-Eakin, Douglas
AU - Lovely, Mary E.
N1 - Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 1996/4
Y1 - 1996/4
N2 - 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. However, the effect on manufacturing or aggregate output 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 evidence to suggest 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.
AB - 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. However, the effect on manufacturing or aggregate output 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 evidence to suggest 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.
KW - External scale economies
KW - Public infrastructure
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U2 - 10.1016/0166-0462(95)02126-4
DO - 10.1016/0166-0462(95)02126-4
M3 - Article
AN - SCOPUS:0030462084
VL - 26
SP - 105
EP - 123
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
SN - 0166-0462
IS - 2
ER -