Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-28T01:12:42.578Z Has data issue: false hasContentIssue false
  • English
  • Français

The “Public Capital Hypothesis”: The Case of Germany

Published online by Cambridge University Press:  17 August 2016

Klaus Conrad  and
Helmut Seitz
Klaus Conrad
Affiliation:
Universität Mannheim
Helmut Seitz
Affiliation:
Universität Mannheim
Get access

Summary

According to the “public capital hypothesis” public investment crowds in private investment by increasing the rate of return to private capital. The present paper uses an extended cost function with public capital included as an unpaid fixed factor of production to examine the impact public capital has on the private economy. Using a panel of four highly aggregated sectors of the West German Economy, it is shown, that the provision of public capital raises the demand for private capital, as suggested by the public capital hypothesis. In addition, it is shown that public infrastructure capital contributes to the productivity of the private economy.

Résumé

Résumé

Selon l'«hypothèse du Capital Public«, l'investissement public exerce un effet d'attraction sur l'investissement privé en augmentant sa rentabilité. Le présent article utilise une version extensive d'une fonction de coût dans laquelle le capital public est intégré sous la forme d'un facteur fixe de production gratuit en vue d'examiner son impact sur le secteur privé. En utilisant un échantillon de 4 secteurs fortement agrégés de l'économie ouest-allemande, on montre que la présence de capital public augmente la demande de capital privé, confirmant ainsi l'hypothèse du capital public. De plus, on montre que le capital public d'infrastructure contribue à la productivité de l'economie privé.

Keywords

E6H3H4E6H3H4
Type
Part II: Productivity Slowdown and Innovative Activity
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 58 , Issue 3-4: Output and Employment Fluctuations , 1992 , pp. 308 - 327
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1992 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

(*)

We acknowledge receipt of valuable comments by three anonymous referees on an earlier version of the paper.

References

REFERENCES

Aschauer, D.A. (1989), Is Public Expenditure Productive?, Journal of Monetary Economics, Vol. 23, pp. 177–200 Google Scholar
Berndt, E.R. and Hansson, B. (1991), Measuring the Contribution of Public Infrastructure Capital in Sweden, NBER working paper, No. 3842.Google Scholar
Conrad, K. and Unger, R. (1987), Ex-post Tests for Short- and Long-Run Optimization, Journal of Econometrics, Vol. 36, pp. 339–358.Google Scholar
Costa, J., Ellson, R. and Martin, R. (1987), Public Capital, Regional Output and Development: Some Empirical Evidence, Journal of Regional Science, Vol. 27, pp. 419–435.Google Scholar
Diewert, W E. (1986), The Measurement of the Economic Benefits of Infrastructure Services, Springer-Verlag, Heidelberg, New York Google Scholar
Hsiao, Ch. (1986), Analysis of Panel Data, Cambridge University Press, Cambridge USA, 1986.Google Scholar
Jorgenson, D.W. (1963), Capital Theory and Investment Behavior, American Economic Review, Vol. 53, pp. 247–259.Google Scholar
Lau, L.J. (1978), Applications of profit functions, in: Fuss, and McFadden, , eds., Production economics: A dual approach to theory and applications, North-Holland, Amsterdam.Google Scholar
Lynde, C. and Richmond, J. (1992), The Role of Public Capital in Production, The Review of Economics and Statistics, Volume LXXTV, pp. 37–44.Google Scholar
Nadiri, I. and Mamuneas, T. (1991), The Effect of Public Infra-structure and R&D Capital on the Cost Structure and Performance of the U.S. Manufacturing Industries, NBER Working Paper No. 3887.Google Scholar
Ratner, J. B. (1983), Government Capital and The Production Function for U.S. private Output, Economics Letters, Vol. 13, pp. 213–217.Google Scholar
Segal, D. (1976), Are There Returns to Scale in City Size?, Review of Economics and Statistics, Vol. 58, pp. 339–350.Google Scholar
Tatom, J. A. (1991), Should Government Spending on Capital Goods be Raised?, Review of the Federal Reserve Bank of St. Louis, Vol. 73, No. 2, pp. 3–15.Google Scholar
Seitz, H. (1992), Public Capital and the Demand for Private Inputs: The crowding out hypothesis reconsidered, ZEW Discussion Paper n° 92-08, ZEW (Centre for European Economic Research), Mannheim.Google Scholar