State Infrastructure and Productive Performance

48 Pages Posted: 18 Jul 2001 Last revised: 19 Nov 2022

See all articles by Catherine J. Morrison Paul

Catherine J. Morrison Paul

University of California, Davis - Department of Agricultural and Resource Economics; National Bureau of Economic Research (NBER); University of Hartford - Barney School of Business

Amy Ellen Schwartz

New York University (NYU) - Institute for Education and Social Policy; Syracuse University - Center for Policy Research; National Bureau of Economic Research (NBER)

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Date Written: January 1992

Abstract

The impact of public infrastructure investment on the productive performance of firms has been an important focus of the recent literature on productivity growth. The size of this impact has important implications for policymakers' decisions to invest in public capital, and productivity analysts' evaluation of productivity growth fluctuations and declines. However, detailed evaluation of the infrastructure impact is difficult using existing studies which rely on restricted models of firms' technology and behavior. In this paper we construct a more complete production theory model of firms' production and input decisions. We then apply our framework to state-level data on the output production and input (capital, nonproduction and production labor and energy) use of manufacturing firms to evaluate the contribution of infrastructure to firms' costs and productivity growth. We find that infrastructure investment does provide a significant direct benefit to manufacturing firms and thus augments productivity growth. We also show, however, that this evidence should be interpreted taking into account the social cost of such capital (which is not reflected in firms' costs), and the indirect impact resulting from scale effects.

Suggested Citation

Morrison Paul, Catherine J. and Schwartz, Amy Ellen and Schwartz, Amy Ellen, State Infrastructure and Productive Performance (January 1992). NBER Working Paper No. w3981, Available at SSRN: https://ssrn.com/abstract=227355

Catherine J. Morrison Paul (Contact Author)

University of California, Davis - Department of Agricultural and Resource Economics ( email )

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National Bureau of Economic Research (NBER)

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University of Hartford - Barney School of Business

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Amy Ellen Schwartz

Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States

New York University (NYU) - Institute for Education and Social Policy ( email )

United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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