A multilevel analysis on the economic impact of public infrastructure and corruption on Italian regions

Torrisi, Gianpiero (2009): A multilevel analysis on the economic impact of public infrastructure and corruption on Italian regions.

Abstract

This paper uses data contained in the Regional Public Accounts database to investigate the heterogeneity of the impact of public infrastructure across Italian regions basing the analysis also on institutional and political ground. The issue is here addressed linking the analysis of the impact of infrastructure on GDP with the issue of corruption by means of a random coefficient panel data model approach. I consider a novel objective measure of corruption that consists of the difference between a measure of the physical quantities of public infrastructure and the cumulative price government pays for public capital stocks. The empirical analysis confirms the existence of parameter heterogeneity across Italian regions and is also consistent with theoretical considerations that corruption negatively affects economic performance.

• Item Type: MPRA Paper
• Language: English
• Keywords: orruption; public expenditure; infrastructure, random coefficients; regional public accounts.
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R58 - Regional Development Planning and Policy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

References

A.Skrondal and S. Rabe-Hesketh, Eds. (2004). Generalized Latent Variable Modeling: Multilevel, Longitudinal and Structural Equation Models. Boca Raton, FL, Chapman & Hall/CRC.

Ades, A. and R. Di Tella (1997). "The New Economics of Corruption: a Survey and some New Results." Political Studies 45(3): 496-515.

Anderson, T. W. (1951). "Estimating linear restrictions on regression coefficients for multivariate normal distributions." Annals of Mathematical Statistics 22: 327-51.

Anselin, L. (1999). "Spatial Econometrics." Mimeo.

Aschauer, D. A. (1989). "Is Public Expenditure Productive?" Journal of Monetary Economics 23: 177-200.

Baltagi, B. H., S. H. Song, et al. (2001). "The unbalanced nested error component regression model." Journal of Econometrics 101: 357-381.

Barro, R. J. (1988). "Government Spending In A Simple Model Of Endogenous Growth." National Bureau Of Economic Research Working Paper No. 2588.

Biehl, D. (1991). The Role of Infrastructure in Regional Development. in Infrastructure and Regional Development R.W.Vickerman. London, Pion.

Bonaglia, F., E. La Ferrara, et al. (2001). " Public Capital and Economic Performance: Evidence from Italy." IGIER Working Paper No. 163.

Brancalente, B., M. D. Palma, et al. (2006). Investimenti, Capitale Pubblico e Dotazione Fisica di Infrastrutture nelle Regioni Italiane Federalismo, equità, sviluppo. I risultati delle politiche pubbliche analizzati e misurati dai conti pubblici territoriali. F. Barca, F. Cappiello, L. Ravoni and M. Volpe. Bologna, Il Mulino.

Buhr, W. (2003). "What is Infrastructure? ." Department of Economics, School of Economic Disciplines, University of Siegen. Siegen Discussion Paper No. 107-03.

Canning, D. and P. Pedroni (1999). " Infrastructure and Long Run Economic Growth." Mimeo.

Cazzola, F., Ed. (1988). Della corruzione. Fisiologia e patologia di un sistema politico. Bologna, Il Mulino.

Cellini, R., Ed. (2004). Politica economica. Introduzione ai modelli fondamentali Milano, McGraw-Hill.

Cohen, J. P. and C. J. Morrison Paul (2004). "Public Infrastructure Investment, Interstate Spatial Spillovers, and Manufacturing Costs." Review of Economics and Statistics 86: 551-560.

Coppier, R., Ed. (2005). Corruzione e Crescita Economica. Teorie ed Evidenze Empiriche di una complessa relazione. Roma, Carocci.

Crihfield, J. and M. Panggabean (1995). "Is public infrastructure productive? A metropolitan perspective using new capital stock estimates." Regional Science and Urban Economics 25: 607-630.

De Long, J. B. (1988). "Productivity Growth, Convergence, and Welfare: Comment." American Economic Review 78: 1138-54.

Del Monte, A. and E. Papagni (2001). "Public Expenditure, corruption, and economic growth: the case of Italy." European Journal of Political Economy 17: 1-16.

Del Monte, A. and E. Papagni (2007). "The determinant of corruption in Italy: Regional panel data analysis." European Journal of Political Economy 23: 379-396.

Dempster, M. and A. Wildasky (1982). Modelling the U.S. federal spending process: Overview and implications. The grants economy and collective consumption. R.C.O.Matthews and G. D. Stafford. New York, The Macmillan Press.

Di Palma, M. and C. Mazziotta (2002). La dotazione di capitale pubblico in Europa e in Italia. La competitività dell'Italia. M.Baldassarri, G.Galli and G.Piga. Roma, Edizioni Il Sole-24 Ore. vol. III: Regole per il mercato.

Easterly, W. and S. Rebelo (1993). "Fiscal policy and economic growth An empirical investigation." Journal of Monetary Economics 32: 417-458.

Ecoter (1999). Analysis of the infrastructure endowment in main European countries. Rome.

Esfahani, H. and M. T. Ramìres (2003). "Institutions, Infrastructure and Economic Growth." Journal of Development Economics 70: 443-477.

Estache, A. (2006). "Infrastructure. A Survey of Recent and Upcoming Issues." World Bank. Mimeo.

Evans, P. and G. Karras (1994). "Is government capital productive? Evidence from a panel of seven countries " Journal of Macroeconomics 16(2): 271-279.

Ezcurra, R., C. Gil, et al. (2005). "Public Capital, Regional Productivity and Spatial Spillovers." The Annals of Regional Science 39: 471-94.

Fernald, J. (1999). "Assessing the Link between Public Capital and Productivity." American Economic Review 89: 619-638.

Ferrara, E. L. and M. Marcellino (2000). "TFP, Costs, and Public Infrastructure: An Equivocal Relationship." IGIER Working Paper No. 176.

Glover, D. R. and J. L. Simon (1975). "The effect of population density on infrastructure: the case of road building." Econ. Dev. Cult. Change 23: 453--468.

Golden, M. A. and L. Picci (2005). "Proposal for a New Measure of Corruption Illustrated with Italian Data." Economics & Politics 17(1): 38.

Goldsmith, R. W. (1953). "A perpetual inventory of national wealth." National Bureau of Economic Research 14.

Gramlich, E. M. (1994). "Infrastructure Investment: A Review Essay " Journal of Economic Literature XXXIII: 1176-1196.

Hansen, L. (1982). "Large sample properties of generalized method of moments estimators." Econometrica 50(3): 1029-1054.

Hansen, N. M. (1965). "The structure and determinants of local public investment expenditures." Review of economics and statistics 2: 150-162.

Hausman, J. (1978). "Specication tests in econometrics." Econometrica 46(3): 1251-1271.

Im, K. S., M. H. Pesaran, et al. (2003). "Testing for Unit Roots in Heterogenous Panels." Journal of Econometrics 115(1): 53-74.

Infrastructure Canada (2007). Infrastructure and Productivity: A Literature Review. Transport Infrastructure and Communities Portfolio, Government of Canada. Research and Analysis Division Infrastructure.

Irmen, A. and J. Kuehnel (2008). Productive Government Expenditure and Economic Growth. CESifo. Working paper No. 2314.

ISTAT. "Waypoint Italia." Retrieved 27/11/2008, from http://xoomer.alice.it/ntpal/GPS/ISTAT/links.html.

ISTAT (2006). Le Infrastrutture in Italia. Un'analisi della dotazione e della funzionalità. Rome.

ISTAT (2007). "Rapporto Annuale 2005." ISTAT cap 6.

ISTAT (December 2005). "Il reddito disponibile delle famiglie nelle regioni italiane. Anni 1995-2003." ISTAT Conti Nazionali e Statistiche in breve.

Kemmerling, A. and A. Stephan (2002). "The Contribution of Local Public Infrastructure to Private Productivity and its Political Economy: Evidence from a Panel of Large German Cities." Public Choice 113(34): 403-424.

Konya, L. (2001). "Panel Data Unit root Tests with an Application." Central European University Working Paper No. 2.

Koopmans, T. C. (1965). On the concept of optimal economic growth,. in (Study Week on the) Econometric Approach to Development Planning. Amsterdam, North-Holland Publishing Co: chap. 4. pp. 225-87.

Leamer, E. E., Ed. (1978). Specification Searches: Ad Hoc Inference from Nonexperimental Data. New York, Wiley.

Levin, A. and C. F. Lin (1992). "Unit Roots tests in Panel Data: Asymptotic and Finite-Sample Properties." University of California at San Diego. Departement of Economics Economic Working Paper seires 92-23.

Levine, R. and D. Renelt (1990). "Cross Country Studies of Growth and Policy: Some Methodological, Conceptual, and Statistical Problems." World Bank.

Levine, R. and D. Renelt. (1992). "A Sensitivity Analysis of Cross-Country Growth Regressions." American Economic Review 82: 942-963.

Levine, R. and S. Zervos (1993). "What We Have Learned About Policy and Growth from Cross-Country Regressions?" American Economic Review, 83: 427-430.

Looney, R. and P. Frederiksen (1981). "The Regional Impact of Infrastructure Investment in Mexico." Regional Studies 15(4): 285-296.

Maddala, G. S. and S. Wu (1999). "A comparative study of Unit Root Tests with Panel Data and a New Simple Test." Oxford Bullettin of Economics and Statistics. Department of Economics, University of Oxford. 61: 631-652.

Marrocu, E., R. Paci, et al. (2006). Gli effetti del Capitale Pubblico Sulla produttività delle Regioni Italiane. . Federalismo, equità, sviluppo. I risultati delle politiche pubbliche analizzati e misurati dai Conti Pubblici Territoriali. F. Barca, F. Cappiello, L. Ravoni and M. Volpe. Bologna, Il Mulino.

Marselli, R. and M. Vannini (2006). L'efficienza tecnica del settore pubblico regionale attraverso gli indicatori di contesto e la spesa pubblica consolidata. Federalismo, Equità, Sviluppo. I risultati delle politiche pubbliche analizzati e misurati dai conti pubblici territoriali Bologna, Il Mulino.

Mastromarco, C. and U. Woitek (2004). "Public Infrastructure investment and efficiency in Italian Regions." www.cide.info/conf/papers/1161.pdf.

Maurizio Di Palma, C. Mazziotta, et al., Eds. (1998). Infrastrutture e sviluppo. Primi risultati: indicatori quantitativi a confronto (1987-95). Quaderni sul Mezzogiorno e le politiche territoriali. Roma, Confindustria.

Mauro, P. (1995). "Corruption and growth." Quarterly Journal of Economics 10: 681-712.

Mauro, P. (1997). The effects of corruption on growth, investment, and government expenditure: a cross-country analysis. K. A. Elliot, ed., Corruption and the Global Economy. Washington, DC.

Mauro, P. (1998). "Corruption and the composition of government expenditure." Journal of Public Economics 69: 263-279.

Mazziotta, C. (1998). Definizione di aree e di indicatori per la misurazione della dotazione di infrastrutture. Parte II - La definizione degli indicatori. in Istituto Guglielmo Tagliacarne, Statistica e territorio. Esperienze e nuovi percorsi di ricerca per l’analisi delle economie locali Milan, F. Angeli.

McLachlan, G. J. and K. E. Basford, Eds. (1988). Mixture Models. New York, Marcel Dekker.

Montanaro, P. (2003). "Lo stock di capitale pubblico: una stima per regione e per tipologia di bene." Rivista economica del Mezzogiorno 3.

Montinola, G. R. and Jackman. (2002). "Sources of corruption: a cross-country study. ." British Journal of Political Science 32: 147–170.

Moran, P. A. P. (1948). "The interpretation of statistical maps." Biometrika 35: 255-260.

Moran, P. A. P. (1950a). "Notes on continuous stochastic phenomena." Biometrika 37: 17-23.

Moran, P. A. P. (1950b). "A test for the serial dependence of residuals." Biometrika 37: 178-181.

Morrison, C. J. and A. E. Schwartz (1996). "State Infrastructure and Productive Performance." American Economic Review 86(5): 1095-1111.

O’Brien, R. M. (2007). "A Caution Regarding Rules of Thumb for Variance Inflation Factors." Quality & Quantity 41: 673-690.

Picci, L. (1995). "Lo stock di capitale nelle regioni italiane." Quaderni del Dipartimento di Scienze Economiche. Università di Bologna 229.

Pritchett, L., Ed. (1996). Mind your P’s and Q’s: the cost of public investment is not the value of public capital. Policy Reseach Working Paper No. 1660. Washington, DC, World Bank.

Putnam, R. D., Ed. (1993). Making Democracy Work. Civic Tradictions in Modern Italy Princenton Princenton University Press.

Romp, W. and J. de Haan (2007). "Public Capital and Economic Growth: A Critical Survey " Perspektiven der Wirtschaftspolitik 8(Special Issue): 6-52.

Rose-Ackerman, S., Ed. (1999). Corruption and Government: Causes, Consequences, and Reform New York, Cambridge University Press.

Sanchez-Robles, B. (1998). "Infrastructure Investment and Growth: Some Empirical Evidence." Contemporary Economic Policy 16: 98-108.

Sargan, J. (1958). "The estimation of economic relationships using instrumental variables." Econometrica 26(3): 393-415.

Self, S. G. and K. Y. Liang (1987). "Asymptotic properties of maximum likelihood estimators and likelihood ratio tests under nonstandard conditions." Journal of the American Statistical Association 82: 605-610.

Servizio Progetti Studi e Statistiche (2007). Quaderno Strutturale Territoriale. Principali indicatori della spesa pubblica in conto capitale

Shaw, P., M.-S. Katsaiti, et al. (2007). "Corruption and Growth Under Weak Identification." University of Connecticut Working paper No.2006-17R.

Simoni, T. (1997). "Il rendimento istituzionale delle regioni: 1990-1994." Polis 11: 417-436.

Sims, C., J. Stock, et al. (1990). "Inference in Linear Time Series Models with Some Unit Roots,." Econometrica 58: 113-144.

Snijders, T. A. B. and R. J. Bosker, Eds. (1999 ). Multilevel Analysis: An Introduction to Basic and Advanced Multilevel Modeling. London Sage Publishers.

Solow, R. M. (1956). "A Contribution to the Theory of Economic Growth." Quarterly Journal of Economics 70: 65-94.

Stephan, A. (2002). "Regional Infrastructure Policy and its Impact on Productivity: A Comparison of Germany and France." Wissenschaftszentrum Berlin, CIC Research Unit Working Paper No. FS IV 0002.

Stram, D. O. and J. W. Lee (1994). "Variance components testing in the longitudinal mixed effects model." Biometrics 50: 1171-1177.

Sturm, J.-E., J. Jacobs, et al. (1995). "Productivity impacts of infrastructure investment in the Netherlands 1853-1913." University of Groningen. Research Institute SOM (Systems, Organisations and Management) Research Report 95D3.

Sturm, J.-E., G. H. Kuper, et al. (1996). "Modelling government investment and economic growth on a macro level: a review." CCSO Series No. 29.

Tanzi, V. and H. Davoodi (1997). "Corruption, Public Investment, and Growth." IMF Working Paper No. 97/139.

Volpe, M. (2007). Guida ai Conti Pubblici Territoriali-Aspetti Metodologici e operativi per la costruzione di conti consolidati di finanza pubblica a livello regionale, Ministero Dello Sviluppo Economico - Dipartimento per le Politiche di Sviluppo e di Coesione- Unità di Valutazione degli Investimenti Pubblici

Wildasky, A., Ed. (1975). The politics of budgetary process. Boston, Little Brown.

Wu, D. (1973). "Alternative Tests of Independence Between Stochastic Regressors and Disturbances." Econometrica 41(4): 733-750.

Zegeye, A. A. (2000). "U.S. Public Infrastructure and its contribution to private sector productivity. ." U.S. Department of Labor Bureau of Labor Statistics(June.).