U.S. Public Infrastructure and Its Contribution to Private Sector Productivity

Aklilu A. Zegeye


The study examines the impact of public infrastructure capital on the productivity of the manufacturing sector for a sample of over 1500 counties and the 50 U. S. states using a translog production function approach. The study also examines productivity convergence across states and across counties. The county level data are chosen as a unit of analysis in order to minimize the impact of the macro-economy on the estimates. The study finds a positive correlation between infrastructure and output at both the state and local levels. The evidence also seems to suggest that the elasticity of public capital on private sector output rises with the level of aggregation. The estimates further show that convergence is occurring faster at the state level than at the county level which has a similar implication of increasing spillover with the level of aggregation. However, the study finds that even though public infrastructure does have an impact on output and productivity at both the state and county levels, its influence on productivity is small.

JEL-codes: H54, R00.