Infrastructure and economic performance

This dissertation examines the productivity impact of public infrastructure capital on economic growth in the U.S., using a production function approach. The linkage between public infrastructure investment and overall economic performance is important. This empirical dissertation, however, focuses on issues such as (i) which sectors of the economy are most sensitive to variation in public capital, (ii) which types of public capital are most important for private productivity, and (iii) how long it takes to see a positive effect in productivity/output of a particular industry. This study expands the existing literature in two ways: disaggregates more comprehensively by state and by industry, and addresses timing issues more carefully, i.e., short-run versus long-run effects of public capital. A common belief is that public capital enhances the productivity of private capital, raises its rate of return and encourages more investment. State-level analysis shows that there is a small positive relationship between public capital and private Gross State Product. At the industry level, however, there appears to be some incentive for investment in public capital in terms of the benefits accruing to wholesale trade industry and several of manufacturing industries. There is also some evidence that public capital acts as a substitute for private capital and "crowds out" private investment.