Public Infrastructure and State Economic Development

Abstract

The effect of public infrastructure on long-run economic performance has been actively debated in the academic literature and public policy circles. A comparison of the divergent results in this literature is difficult because studies use different data, production functions, and statistical procedures. A major point of contention is that the studies most favorable toward infrastructure investment ignore differences in state production functions. This study attempts to clarify the literature by using Munnell's original data, but also using estimation techniques that control for cross-state differences in production functions. The results confirm that the strong original findings were derived from poor estimation techniques.