Working Paper: NBER ID: w4824
Authors: Douglas Holtz-Eakin; Amy Ellen Schwartz
Abstract: Researchers, commentators, and politicians have devoted steadily more attention to infrastructure in response to claims that inadequate accumulation of public capital has contributed to substandard U.S. economic growth. Despite this, the link between infrastructure and productivity growth remains controversial. In this regard, it is somewhat surprising that infrastructure research has developed in isolation from the large literature on economic growth. We develop a neoclassical growth model that explicitly incorporates infrastructure and is designed to provide a tractable framework within which to analyze the empirical importance of public capital accumulation to productivity growth. We find little support for claims of a dramatic productivity boost from increased infrastructure outlays. In a specification designed to provide an upper bound for the influence of infrastructure, we estimate that raising the rate of infrastructure investment would have had a negligible impact on annual productivity growth between 1971 and 1986.
Keywords: infrastructure; economic growth; public capital
JEL Codes: H54; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor force growth (J21) | productivity growth (O49) |
| investment patterns (G11) | productivity growth (O49) |
| infrastructure investment (H54) | productivity growth (O49) |
| infrastructure investment (H54) | output elasticity of infrastructure (H54) |