http://www1.worldbank.org/publicsector/pe/peammarch2005/glomm-ravikumar.pdf

Productive government expenditures and long-run growth

This paper utilises an intertemporal optimisation framework to study the effects of public infrastructure capital on output supply and input demands in 12 OECD countries. We find that in all 12 countries: (i) public capital has positive long-run effects on both output supply and input demands (ii) its mean short-run rates of return are fairly low, while the corresponding long-run rates are much higher but declining over time. These findings underscore important under-investment gaps in infrastructure during the 1970s and 1980s; these gaps however narrowed down significantly (in a few cases completely) by the early 1990s.

Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economies

Using the word capital to represent two different concepts is not such a problem when government is responsible for only a small fraction of national investment and is reasonably effective (as in the United States). But when government is a major investor and is ineffective, the gap between capital and cumulative, depreciated investment effort (CUDIE) may be enormous. A public sector steel mill may absorb billions as an investment, but if it cannot produce steel it has zero value as capital. The cost of public investment is not the value of public capital. Unlike for private investors, there is no remotely plausible behavioral model of the government as investor that suggests that every dollar the public sector spends as investment creates capital in an economic sense. This seemingly obvious point has so far been uniformly ignored in the voluminous empirical literature on economic growth, which uses, at best, cumulated, depreciated investment effort (CUDIE) to estimate capital stocks. But in developing countries especially, the difference between investment cumulated at cost and capital value is of primary empirical importance: government investment is half or more of total investment. And perhaps as much as half or more of government investment spending has not created equivalent capital. This suggests that nearly everything empirical written in three broad areas is misguided. First, none of the estimates of the impact of public spending identify the productivity of public capital. Even where public capital could be very productive, regressions and evaluations may suggest that public investment spending has little impact. Second, everything currently said about total factor productivity in developing countries is deeply suspect, as there is no way empirically to distinguish between low output (or growth) attributable to investments that created no factors and low output (or growth) attributable to low (or slow growth in) productivity in using accumulated factors. Third, multivariate growth regressions to date have not, in fact, controlled for the growth of capital stock, so spurious interpretations have emerged. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand the importance of public sector actions for economic growth.

https://papers.ssrn.com/sol3/Delivery.cfm/1095.pdf?abstractid=630713&mirid=5

The Tyranny of Concepts: CUDIE (Cumulated, Depreciated Investment Effort) Is Not Capital

https://isiarticles.com/bundles/Article/pre/pdf/6615.pdf

Effect of transportation infrastructure on economic growth in India: The VECM approach

Using data drawn from the Canadian, Mexican, and U.S. censuses, we find a numerically comparable and statistically significant inverse relation between immigrant-induced shifts in labor supply and wages in each of the three countries: A 10% labor supply shift is associated with a 3%‐4% opposite-signed change in wages. Despite the similarity in the wage response, theimpactofmigrationonthewagestructuredifferssignificantlyacrosscountries.International migration narrowed wage inequality in Canada; increased it in the United States; and reduced the relative wage of workers at the bottom of the skill distribution in Mexico. (JEL: J31, J61)

Cross‐country variation in the impact of international migration: canada, mexico, and the united states

A restricted equilibrium framework is utilized to estimate the contribution of public investment in infrastructure to private sector profitability. A restricted cost function in translog form which treats labor and materials as variable inputs and private capital/public sector capital stock in transport, communications, and electricity as quasi-fixed inputs is specified. A system of non-linear equations comprising variable cost function and derived input demand equations is estimated using data from 1970-87 for 26 Mexican 3-digit manufacturing industries. The divergence of private and public capital stocks from their static equilibrium levels is determined. The net rate of return to fixed factors is also calculated. Estimates of allocative efficiency are derived. The study also gives estimates of short- and long-run scale economies, output elasticity of factors, measures of productivity growth, and technical change. Economically significant and policy implications of the findings are given.

A Shah

Papers

Dynamics of public infrastructure, industrial productivity and profitability. in: transport infrastructure