Stone, Joe and Bania, Neil (2009): Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states.
Download (121kB) | Preview
Applying a Barro-style model of endogenous growth to a fifty-year panel of states from 1957 to 2007, We examine the extent to which expenditures on public education and infrastructure— together with the taxes necessary to support them— enhance or impede the steady-state growth of state and local economies, as measured by per capita personal income. Our findings suggest that the independent effect of tax expenditures on either public infrastructure or education alone is significantly negative, but the complementary effect of each on the other is positive enough to make their combined effect significantly positive— except at large scales, where we find diseconomies, consistent with the ‘growth hill’ predicted by theory. Policy effects are identified empirically using a recursive structure with very long lags, GMM/instrumental variables, and controls for both fixed and time-varying heterogeneity. Results are robust to a variety of alternative specifications.
|Item Type:||MPRA Paper|
|Original Title:||Brains, drains, and roads, growth hills: complementarity between public education and infrastructure in a half-century panel of states|
|Keywords:||growth human capital public infrastructure|
|Subjects:||H - Public Economics > H4 - Publicly Provided Goods
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H72 - State and Local Budget and Expenditures
H - Public Economics > H0 - General > H00 - General
|Depositing User:||Joe/A. Stone|
|Date Deposited:||13. Jul 2009 12:56|
|Last Modified:||12. Feb 2013 19:53|
Gray, Jo A. and Joe Stone, “ Ricardian Equivalence for Sub-national States,” Economics Bulletin 5 No. 1 (2006): 1-12.
Glaeser, Edward L. et. al. "economic growth in a cross-section of cities," NBER working paper (February 2000).
Hanushek, Eric A. and Ludger Woessmann,” The role of School Improvement in Economic Development” Center for Economic Studies and IFO Institute for Economic Research Working Paper 1911 February (2007).
Haughwout, Andrew, Inman, Robert., Craig, Steven and Thomas Luce. “Local Revenue Hills: Evidence from Four U.S. Cities,” Review of Economics and Statistics 86 No.2 (June, 2004): 570-85.
Helms, L. Jay. “The Effect of State Local Taxes on Economic Growth: A Time Series-Cross Section Approach,” Review of Economics and Statistics 67 No. 4 (November, 1985): 574-582.
Kalaitzidakis, Pantelis and S. Kalivitis. “’New’ Public Investment and/or Public Capital Maintenance for Growth? The Canadian Experience,” Economic Inquiry 43 (2005): 586-600.
Mark, Stephen, McGuire, Therese and Leslie Papke. “The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area,” National Tax Journal 53 No. 1 (2000): 105-124.
Mofidi, Ala and Joe Stone. “Do State and Local Taxes Affect Economic Growth?” Review of Economics and Statistics 72 No. 4 (November, 1990): 686-914.
Pereira, Alfred. “Is All Public Capital Created Equal?” Review of Economics and Statistics 82 No. 3 (August, 2000): 513-8.
Poot, Jacques. “A Synthesis of Empirical Research on the Impact of Government on Long-Run Growth,” Growth and Change 31 No. 4 (2000): pp. 516-46.
Roback, Jennifer ”Wages, rents, and amenities: differences among workers and regions” Economic Inquiry 26:1 (2007) 23-41.
Romer, Paul. M.”Growth Based on Increasing Returns Due to Specialization” The American Economic Review77: 2, Papers and Proceedings of the Ninety-Ninth Annual Meeting of the American Economic Association (May, 1987) pp. 56-62