Public Capital, Regional Output, and Development: Some Empirical Evidence

The goal of our paper is to provide direct estimates of the association between public capital and regional output. This is made possible by the construction of a data series which measures public capital at the state level. The relation between public capital and other productive factors is tested using a translog production function. Our results show that labor and public capital are complementary inputs, and that public capital exhibited diminishing returns. We also consider restrictions on the translog formulation. Linear homogeneity is rejected in all cases, and the Cobb‐Douglas specification is rejected for the manufacturing and all sectors categories.