Optimal endowments of public capital: An empirical analysis for the Spanish regions

Bajo‐Rubio O. and Díaz‐Roldán C. (2005) Optimal endowments of public capital: an empirical analysis for the Spanish regions, Regional Studies 39 , 297–304. Regional infrastructure policies, through increased public investment, are widely used to promote the development of poorer regions in European countries. This paper tries to find some evidence on the optimality in the provision of government capital for the case of the Spanish regions, 1965–95. To this end, a simple optimality condition is derived from an optimization growth model, namely, that marginal products of private and public capital should be equal. In this way, assuming that private capital was optimally provided, the results suggest that government capital would be under‐provided in the more productive regions, unlike the less productive regions, where the opposite result would hold.