Public Capital and Output Growth in Portugal: An Empirical Analysis

IMF Working Papers, January 1, 2000

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Public Capital and Output Growth in Portugal: An Empirical Analysis

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Bibliographic details

• Authors: Jenny E Ligthart
• Published: January 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451842777.001

Summary and main findings

• The paper investigates the growth effects of public capital in Portugal using annual data for the period 1965-95.
• Both a production function and a vector autoregressive model are estimated.
• Public capital is shown to be a significant long-term determinant of output growth.
• The size of the estimated production elasticity indicates, in line with studies for other countries, a substantial growth payoff from public investment.
• Disaggregating public capital shows that investment related to, among other things, roads, railways, and airports is more productive than public investment in other major categories.

Methodology

• Empirical approaches used:
  • Production function estimation.
  • Vector autoregressive (VAR) model estimation.
• Time coverage:
  • Annual data for the period 1965-95.
• Econometric concepts and techniques referenced:
  • cointegration
  • Engle-Granger result
  • granger causality
  • least squares
  • time series analysis
  • utilization rate
  • Vector autoregression

Disaggregation and sectoral findings

• Disaggregated public capital analysis identifies higher productivity in public investment categories including:
  • roads
  • railways
  • airports
• Other major categories of public investment are found to be less productive relative to the transportation-related investments listed above.

Policy-relevant implications

• Public investment can yield substantial long-term growth payoffs in Portugal, given the significant production elasticity associated with public capital.
• Prioritizing public investment in infrastructure such as roads, railways, and airports may generate higher output growth compared with other categories of public investment.

Content in this bundle

• Public Capital and Output Growth in Portugal: An Empirical Analysis - WP/00/11
  • Public Capital and Output Growth in Portugal: An Empirical Analysis - WP/00/11 (Markdown version)
  • Public Capital and Output Growth in Portugal: An Empirical Analysis - WP/00/11 (PDF)