Public Works Outlays Don't Do Much To Goose Productivity

In recent years, economists have paid increasing attention to the economic impact of infrastructure spending--good old-fashioned public works. Some economists argue that the drop-off in public spending on roads, bridges, and the like over the past two decades had a large negative impact on U.S. productivity growth in the 1970s and 1980s. But in a recent National Bureau of Economic Research paper, economists Douglas Holtz-Eakin of Syracuse University and Amy Ellen Schwartz of New York University cast doubt on the relationship. They developed a growth model to analyze the impact of public capital accumulation on productivity and then studied the experience of the 48 contiguous states between 1971 and 1986. Their conclusion is that public-works outlays aren't significant in explaining the growth rates of states.

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