Is public capital productive in Europe?

Jerome Creel and Gwenaëlle Poilon ()
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Gwenaëlle Poilon: Sciences Po, Postal: 27, rue Saint-Guillaume, Paris 75007, France

No 2006-10, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: This paper addresses the issue of whether and by how much public investment or public capital can enhance economic performance. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A VAR model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are therefore estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a “golden rule of public finance” in EMU is legitimate.

Keywords: public capital; VAR model; panel; European economies (search for similar items in EconPapers)
JEL-codes: C32 E62 H54 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-eec, nep-eff, nep-mac and nep-pbe
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Is public capital productive in Europe? (2008)
Working Paper: Is public capital productive in Europe? (2008)
Working Paper: Is public capital productive in Europe? (2008)
Working Paper: Is Public Capital Productive in Europe? (2006)
Working Paper: Is Public Capital Productive in Europe? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:0610

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