EIB Papers Volume 13. n°1/2008 - European Investment Bank

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Table 1. Some VAR studies (published since 2000) on the relationship between public capital and economic growth Study Sample/period Public capital Theory Other variables (apart from output) Pereira (2000) USA 1956-1977 (A) Mittnik and Neumann (2001) Canada, France, UK, Japan, The Netherlands and Germany Different samples (Q) Pereira (2001) USA, 1956-1977 (A) Pereira and Roca- Sagales (2001) Spain 1970-1993 (A) Ligthart (2002) Portugal 1965-1995 (A) Voss (2002) US and Canada 1947.I-1998.I 1947.I-1996.IV (Q) Pereira and Roca- Sagales (2003) Spain and 17 regions in Spain, 1970-95 (A) Aggregate public investment and 5 types (in constant prices) Public investment Barro (1990) and Devajaran et al. (1996) Aggregate public investment and 5 types (in constant prices) Stock of infrastructures in transport and communications (in constant prices) Public capital stock (in constant prices) Investment scaled by output Public capital (in constant prices) -- Employment, private investment Private investment, public consumption -- Employment, 7 different types of private investment -- Employment, private capital stock Production function Labour, private capital Neo-classical theories of investment Relative price of public and private investment goods, real interest rate, private investment -- Employment, private capital stock Kamps (2004) 22 OECD countries (A) Public capital stock Production function Labour, private capital Pina and St. Aubyn (2005) Pereira and Andraz (2005) Belloc and Vertova (2006) Creel and Poilon (2006) 62 Volume13 N°1 2008 EIB PAPERS Portugal 1960-2001 (A) Portugal 1976-1998 (A) 7 developing countries different samples (A) 5 OECD countries 1960-2004 (A) Public capital stock Production function Labour, private capital, human capital Public transportation infrastructure investment and 6 types of investment (in constant prices) -- Employment, private investment Public investment -- Private investment Public investment and public capital stock Demand effects and production function Note: A: annual data; Q: quarterly data; DF: Dickey-Fuller; EG: Engle-Granger; PP: Phillips-Perron. Employment, private investment/capital
Stationarity / cointegration test DF unit root test; EG cointegration test PP and DF tests; Johansen cointegration test DF unit root test; EG cointegration test DF unit root test; EG cointegration test DF unit root test; EG and Johansen cointegration tests Stationarity / cointegration results Log of variables are I(1); no cointegration Series are I(1); r varies between 0 (France, UK) and 3 (Canada) Log of variables are I(1); no cointegration Log of variables are I(1); no cointegration Log of variables are I(1); 1 cointegrating vector Specification of output and public capital Growth rate of output and growth rate of investment Log of output and log of investment Growth rate of output and growth rate of investment Growth rate of output and growth rate of capital stock Log of level of output and log of level of capital stock No testing -- Growth rate of output and level of investment scaled by output DF unit root test; No cointegration test Johansen cointegration test Johansen cointegration test DF unit root test; EG cointegration test DF and PP unit root tests; EG and Johansen cointegration tests Log of variables are I(1) Growth rate of output and growth rate of capital stock Variables cointegrated with two or three cointegrating vectors Variables are cointegrated with one cointegrating vector First difference of log is stationary; No cointegration First difference of log of variables are stationary; variables are cointegrated Identification Results Policy function (equivalent to Cholesky decomposition assuming that innovations in public inv. lead innovations in private variables) Policymakers are assumed to know realizations and announce plans that private sector takes into account; private inv. simultaneously affects GDP, but not vice versa. Innovations in public investment lead private sector variables Cholesky where public capital leads private variables Elasticity is 0.043 for aggregate public investment; rate of return 7.8 percent Elasticity no more than 0.1 and only significant for Netherlands and Germany Elasticity is 0.043 for aggregate public investment; rate of return 7.8 percent Elasticity is 0.52 Cholesky Elasticity between 0.20-0.35 Specific ordering imposed starting with output growth and ending with private investment ratio Policy function (equivalent to Cholesky decomposition assuming that innovations in public inv. lead innovations in private variables) Innovations to public investment crowd out private investment Aggregate elasticity is 0.523; rate of return 5.5 percent. Level of stock Cholesky For most countries there is a positive output effect. Level of stock Cholesky Returns between 26.7 and 37.3 percent Growth rate of output and growth rate of investment Growth rate of output and growth rate of investment No testing -- Level of GDP, investment and stock Policy function in which information set includes past values of other variables Various Cholesky orderings in VECM Elasticity of output to aggregate investment is 0.183 Positive output elasticities except for Malawi Various orderings In aggregate demand framework short-lived impact; divers results for capital EIB PAPERS Volume13 N°1 2008 63
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Preface This year the European Inve
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Infrastructure investment, growth a
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High GDP growth in the new member s
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Further productivity gains, includi
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Table 2. Business constraints perce
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Where fiscal positions were sound,
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Despite progress, infrastructure de
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Table 7. Infrastructure indicators
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EU funds provide additional resourc
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Various empirical studies confirm t
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In some new member states there is
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PPPs offer new opportunities to fin
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Strong legal and institutional fram
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Additional fiscal reporting - even
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Fiscal adjustment and reforms need
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EIB Papers Volume 13. n°1/2008 - European Investment Bank

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