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

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High variability of the public-capital stock reduces its long-run impact on output. Figure (4b) shows that a high ratio of public capital to private capital is negatively and significantly related to the impact of public capital on output (the t-statistic is 2.22, with p = 0.038). Apparently, the impact of public capital does not depend on its absolute level, but on its level relative to private capital. If the public capital stock is large relative to the private capita stock, the long-run impact of public capital on output is lower. The regression line in Figure (4c) does not yield a significant relationship (the estimated t-statistic is 0.19, with p = 0.852). So the diversity in our sample with respect to the change in the public-capitalto-GDP ratio is not related to our results for the long-term impact of public capital on output. In other words, this finding suggests that there is not a systematic difference with respect to the longrun impact of public capital on output between countries that saw their capital-to-GDP ratio decline and those that saw this ratio increase. Finally, Figure (4d) suggests that there is a negative and significant relationship between the variability of the public capital stock and our findings for the long-term impact of public capital on output. The estimated t-statistic is -2.40 (p = 0.027). So these findings suggest that high variability of the public capital stock reduces the long-run impact of public capital on output. 11 Figure 4. Government capital and its long-run effect on output, 1960-2001 Estimate of LR e�ect on GDP 72 Volume13 N°1 2008 EIB PAPERS 3 2 1 0 -1 -2 -3 POR ESP CAN (a) Level of public capital NOR GRE FRA USA SWE FIN AUS DEN BEL ITA SWI ICE GBR 0.2 0.4 0.6 0.8 1.0 Government capital / GDP NET NZL Note: The vertical axis shows the long-run impact on GDP of a shock to public capital, while the horizontal axis shows the average public-capital-to-GDP ratio for the country concerned. 11 In principle, there may be two sources of high standard deviations in the public-capital-to-GDP ratio, (i) public investment being “erratic”, and (ii) public investment having a strong trend such that it is very different at the end of the sample from its initial level. As the correlation between the absolute change and the standard deviation of the public-capital-to-GDP ratio is 0.79, we conclude that the variability in the public capital GDP to ratio is largely driven by the second source. AUT IRE JAP
Estimate of LR e�ect on GDP 3 2 1 0 -1 -2 -3 FIN BEL POR NOR SWI GRE SWE ITA AUS ESP (b) Public-capital-to-private-capital ratio FRA CAN DEN 0.1 0.2 0.3 0.4 0.5 Government capital / private capital Note: The vertical axis shows the long-run impact on income of a shock to public capital, while the horizontal axis shows the average ratio of the public capital to private capital stock for the country concerned. Estimate of LR e�ect on GDP 3 2 1 0 -1 -2 -3 IRE ICE (c) Change in the public-capital-to-GDP ratio GRE Note: The vertical axis shows the long-run impact on income of a shock to public capital, while the horizontal axis shows the change in the public-capital-to-GDP ratio over 1960-2001 for the country concerned. USA AUT NET NZL -0.4 -0.2 0 0.2 0.4 GBR USA FRA NOR CAN ICE FIN DEN AUT SWE NET AUS ITA GBR NZL ESP Change in government capital / GDP BEL POR IRE SWI JAP JAP EIB PAPERS Volume13 N°1 2008 73
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EIB Papers • Volume 13 • No1
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Volume 13 • No1 • 2008 EIB Pape
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Preface This year the European Inve
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Infrastructure investment, growth a
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Page 44 and 45: The shares of infrastructure and ho
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Page 48 and 49: There have been marked differences
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Page 96 and 97: While distorting taxes lead to a we
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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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