Research 350 - NZ Transport Agency
Research 350 - NZ Transport Agency
Research 350 - NZ Transport Agency
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ECONOMIC DEVELOPMENT BENEFITS OF TRANSPORT INVESTMENT<br />
• Kamps (1984) suggests that the ‘supernormal’ returns to public capital cited by<br />
Aschauer may be a result of his use of the production function approach. Vector<br />
autoregressive (VAR) modelling may offer a superior approach to production function<br />
approaches as it allows for feedback effects between output (GDP) and inputs (higher<br />
public capital spending). Past VAR modelling cited by Kamps and his own work<br />
indicates a much weaker long run response to increases in public capital spending<br />
then that cited by Aschauer.<br />
• VAR work by Kamps (2004) for New Zealand and Australia (as part of a broader<br />
survey of OECD countries) is reproduced in Table 3.2 below. While Kamps found a<br />
positive long run elasticity of New Zealand real GDP with respect to public capital<br />
(0.11), based on a dataset covering 1960-2001, this result was not statistically<br />
significant at the 95% level, or even at the 68% level. Nor, in common with other<br />
OECD results, was there any evidence for positive New Zealand employment results.<br />
• Also reproduced in Table 3.2 below are findings of a variety of Australian studies of<br />
output elasticity of infrastructure investment. With the exception of Song’s work,<br />
these report much smaller elasticities then Aschauer’s findings.<br />
Table 3.1 Comparison of New Zealand and Australian evidence on responsiveness to public<br />
infrastructure investment<br />
Study<br />
Kamps (2004)<br />
Study Type and<br />
scope<br />
VAR model,<br />
22 OECD countries<br />
including New<br />
Zealand<br />
Elasticity of variable with respect to public<br />
infrastructure investment<br />
GDP/output* Private capital Employment<br />
New Zealand Results<br />
0.11 0.15 0.06<br />
Australian Results<br />
Kamps (2004)<br />
VAR model,<br />
22 OECD countries<br />
including New<br />
0.29** 0.33** -0.24<br />
Zealand<br />
Otto and Voss<br />
(1996) (cited<br />
by Econtech<br />
Australia 0.17 - -<br />
2004)<br />
Pereira (2001)<br />
(cited by<br />
Econtech<br />
Australia 0.17 - -<br />
2004)<br />
Kam (2001) Australia 0.10 - -<br />
Song (2002) Australia 0.27-0.39 - -<br />
NIEIR (2002)<br />
Production function,<br />
Australia<br />
0.18 - -<br />
Econtech CGE model,<br />
(2004)<br />
Australia<br />
0.13 - -<br />
* Specified as real GDP by Kamps<br />
** 68% confidence interval does not cross zero (relevant to Kamps results only)<br />
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