Journal of Economic Growth

, Volume 6, Issue 3, pp 205–227 | Cite as

Public Capital and Economic Growth: A Convergence Approach

  • Etsuro Shioji


This paper estimates dynamic effects of public capital on output per capita. Based on an open economy growth model, I derive a version of the income convergence equation augmented with public capital. This equation is estimated using panel data of United States and Japanese regions. Sensible results are obtained when public capital is disaggregated into components. In both countries, the infrastructure component of public capital turns out to have significantly positive effects. The implied elasticity of output with respect to infrastructure is somewhere around 0.1 to 0.15. This suggests a modest contribution of infrastructure to postwar growth of the two countries.

economic growth income convergence public capital panel data GMM 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Arellano, M., and S. Bond. (1991). “Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equation,” Review of Economic Studies 58, 277-297.Google Scholar
  2. Asako, K. and K. Sakamoto. (1993). “Seifu Shihon no Seisan-ryoku Koka,” (in Japanese), Financial Review 26, 97-102.Google Scholar
  3. Asako, K., A. Tsuneki, S.-I. Fukuda, H. Teruyama, T. Tsukamoto, and M. Sugiura. (1994). “Shakai-shihon no Seisanryoku-koka to Kokyo-toshi-seisaku no Keizai-kosei-hyoka,” (in Japanese), Keizai Bunseki 135.Google Scholar
  4. Aschauer, D. A. (1989). “Is Public Expenditure Productive?” Journal of Monetary Economics 23, 177-200.Google Scholar
  5. Barro, R. J. (1990). “Government Spending in a Simple Model of Endogenous Growth,” Journal of Political Economy 98(5), S103-117.Google Scholar
  6. Barro, R. J., and X. Sala-i-Martin. (1992a). “Convergence,” Journal of Political Economy 100, 233-251.Google Scholar
  7. Barro, R. J., and X. Sala-i-Martin. (1992b). “Regional Growth and Migration: A Japan-United States Comparison,” Journal of the Japanese and International Economies 6, 1072-1085.Google Scholar
  8. Barro, R. J., and X. Sala-i-Martin. (1992c). “Public Finance in Models of Economic Growth,” Review of Economic Studies 59, 645-661.Google Scholar
  9. Barro, R. J., and X. Sala-i-Martin. (1995). Economic Growth, MIT Press.Google Scholar
  10. Blundell, R., and S. Bond. (1998). “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,” Journal of Econometrics 87, 115-143.Google Scholar
  11. Bond, S., A. Hoeffler, and J. Temple. (1998). “GMM Estimation of Empirical Growth Models,” Paper presented at the European Meeting of the Econometric Society, Berlin.Google Scholar
  12. Canova, F., and A. Marcet. (1995). “The Poor Stay Poor: Non-Convergence Across Countries and Regions,” Universitat Pompeu Fabra Working Paper 137.Google Scholar
  13. Caselli, F., G. Esquivel, and F. Lefort. (1996). “Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics,” Journal of Economic Growth 1, 363-389.Google Scholar
  14. Cashin, P. (1995). “Govemment Spending, Taxes and Economic Growth,” IMF Staff Papers 42(2), 237-269.Google Scholar
  15. De la Fuente, A. (1996). “On the Sources of Convergence: A Close Look at the Spanish Regions,” mimeo, Universitat Autònoma de Barcelona.Google Scholar
  16. De la Fuente, A. (1998). “What Kind of Regional Convergence?” mimeo, Universitat Autònoma de Barcelona.Google Scholar
  17. Doi, T. (1998). “Nippon no Shakai Shihon ni Kansuru Paneru Bunseki” (in Japanese), Kokumin Keizai 161, 27-52.Google Scholar
  18. Economic Planning Agency. (1991). Choki Sokyu Suikei: Kenmin Keizai Keisan Hokoku Showa 30 nen ~ Showa 49 nen (in Japanese).Google Scholar
  19. Economic Planning Agency. (1998a) Annual Reports on Prefectural Accounts.Google Scholar
  20. Economic Planning Agency. (1998b) Nippon no Shakai Shihon: 21 Seiki heno Shihon Sutokku (Public Capital in Japan: Capital Stock for the 21 Century, in Japanese).Google Scholar
  21. Evans P., and G. Karras. (1994). “Are Government Activities Productive? Evidence from a Panel of U.S. states,” Review of Economics and Statistics 76(1), 1-11.Google Scholar
  22. Fisher, T., and S. Turnovsky. (1998). “Public Investment, Congestion, and Private Capital Accumulation,” Economic Journal 108, 399-413.Google Scholar
  23. Futagami, K., Y., Morita, and A. Shibata. (1993). “Dynamic Analysis of an Endogenous Growth Model with Public Capital,” Scandinavian Journal of Economics, 607-625.Google Scholar
  24. Garcia-Milà, T., T. J. McGuire, and R. H. Porter. (1995). “The Effects of Public Capital in State-Level Production Functions Reconsidered,” Review of Economics and Statistics.Google Scholar
  25. Glomm G. and Ravikumar B. (1994). “Public Investment in Infrastructure in a Simple Growth Model,” Journal of Economic Dynamics and Control 18, 1173-1187.Google Scholar
  26. Glomm, G., and B. Ravikumar. (1997). “Productive Government Expenditures and Long-run Growth,” Journal of Economic Dynamics and Control 21, 183-204.Google Scholar
  27. Gramlich, E. M. (1994). “Infrastructure Investment: A Review Essay,” Journal of Economic Literature 32, 1176-1196.Google Scholar
  28. Holtz-Eakin, D. (1993). “State-specific Estimates of State and Local Government Capital,” Regional Science and Urban Economics 23, 185-209.Google Scholar
  29. Holtz-Eakin, D. (1994). “Public Sector Capital and the Productivity Puzzle,” Review of Economics and Statistics 76, 12-21.Google Scholar
  30. Hsiao, C. (1986). Analysis of Panel Data. Cambridge University Press, Cambridge, UK.Google Scholar
  31. Islam, N. (1995). “Growth Empirics: A Panel Data Approach,” Quarterly Journal of Economics 110, 1127-1170.Google Scholar
  32. Iwamoto, Y., S. Ouchi, S. Takeshita, and T. Bessho. (1996). “Shakai Shihon no Seisansei to Kokyo Toshi no Chiiki-kan Haibun,” (in Japanese), Financial Review, 27-52.Google Scholar
  33. Kiviet, J. F. (1995). “On Bias, Inconsistency, and Efficiency of Various Estimators in Dynamic Panel Data Models,” Journal of Econometrics 68, 53-78.Google Scholar
  34. Merriman. (1990). “Public Capital and Regional Output: Another Look at Some Japanese and American Data,” Regional Science and Urban Economics 20, 437-458.Google Scholar
  35. Mitsui, K., and K. Ohta. (1995). Shakai Shihon no Seisansei to Koteki Kinyu (in Japanese), Nihon Hyoron Sha, Tokyo.Google Scholar
  36. Mulligan, C. B., and X. Sala-i-Martin. (1993). “Transitional Dynamics in Two-Sector Models of Endogenous Growth,” Quarterly Journal of Economics 108(3), 737-773.Google Scholar
  37. Mulligan, C. B., and X. Sala-i-Martin. (1997). “A Labor-Income-Based Measure of the Value of Human Capital: An Application to the States of the United States,” Japan and the World Economy 9(2), 159-191.Google Scholar
  38. Nelson, R. R., and E. S. Phelps. (1996). “Investment in Humans, Technological Diffusion, and Economic Growth,” American Economic Review 56(2), 503-530.Google Scholar
  39. Nerlove, M. (1971). “Further Evidence on the Estimation of Dynamic Relations from a Time Series of Cross Sections,” Econometrica 39(2), 359-382.Google Scholar
  40. Nickell, S. (1981). “Biases in Dynamic Models with Fixed Effects,” Econometrica 49(6), 1417-1426.Google Scholar
  41. Ogawara, T., and N. Yamano. (1995). “Shakai Shihon no Seisanryoku Koka: Chiiki Keizai heno Eikyo Bunseki,” (in Japanese), Denryoku Keizai Kenkyu 34, 45-57.Google Scholar
  42. Shioji, E. (1997). “Convergence in Panel Data: Evidence from the Skipping Estimation,” Universitat Pompeu Fabra Working Paper 235.Google Scholar
  43. Solow, R. M. (1956). “A Contribution to the Theory of Economic Growth,” Quarterly Journal of Economics 70, 65-94.Google Scholar
  44. Summers, R., and A. Heston. (1991). “Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988,” Quarterly Journal of Economics 106(2), 327-368.Google Scholar
  45. Swan, T. W. (1956). “Economic Growth and Capital Accumulation,” Economic Record 32, 334-361.Google Scholar
  46. Yoshino, N., and T. Nakajima. (1999). Kokyo-toshi no Keizai-koka (in Japanese). Nihon Hyoron Sha, Tokyo.Google Scholar

Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Etsuro Shioji
    • 1
  1. 1.Department of EconomicsYokohama National UniversityHodogaya-ku, YokohamaJapan

Personalised recommendations