Investment in infrastructure as determinant of metropolitan productivity

Abstract

Utilizing newly assembled data on per capita metropolitan investments from the Census of Governments - Finance Statistics, this paper assesses the effects of local (i.e., non-state and non-federal) government investments in public capital on metropolitan factor productivity. Differences in productivity across metropolitan areas are modeled as a Hicks-neutral production function shifter, and the analysis covers 261 metropolitan areas of the United States for the period 1977 to 1992. These findings indicate that there is no significant relationship between levels of public capital investments and the levels of metropolitan productivity for the period 1977, 1982, 1987, and 1992; however, a positive and significant relationship is found between the growth rate of local government investments in public capital and the growth rate of metropolitan productivity for the fifteen-year period.