Abstract
This paper provides an empirical evaluation of the growth impact of public infrastructure in a panel of 18 OECD countries during 1870–2009. This study goes beyond the traditional analysis of growth accounting models by exploring the indirect effect of stock of core infrastructure on output growth through its impact on productivity. Constructing a long-run historical dataset on infrastructural capital formation spanning from 1870, estimated results show that growth in both labour productivity and total factor productivity are positively, but not substantially, influenced by growth in the stock of infrastructure. Furthermore, applying the system GMM technique (Generalised Method of Moments) revels that although rate of returns to investment in infrastructure exceed the private rate in OECD countries, it is not as high as positive externalities associated with investment in equipment and structure investment.
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