The Effect of Public Capital on Aggregate Output : – Empirical Evidence for 22 OECD Countries –

Abstract Based on new estimates of public and private capital stocks for 22 OECD countries we study the dynamic effect of public capital on the real gross domestic product using a vector autoregression approach. Whereas most former studies put effort on examining the effects of public capital in a single country, this paper covers a large set of OECD countries. The results show that public capital has a positive effect on output in the short-, medium- and long-run in most countries. In countries where the effect is negative, possible explanations as the different productivities of investments, crowding out or high growth rates of government debt are analyzed.