The Regional Macroeconomic Effects of Public Infrastructure in China
Date
2011-02-25
Authors
Song, Chunpu
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Abstract
This dissertation examines the relationship between public infrastructure and regional economic productivity in China. Based on a panel data set for 29 regions of China for a 17-year period of 1987-2003, a three-step nonstationary panel analytical procedure is conducted to investigate whether public infrastructure is productive in China. The results show that public infrastructure is productive in China across 29 regions from 1987 to 2003, with a moderate estimated output elasticity of 0.15. Among the eastern, central and western mega-regions in China, the productivity effect of public infrastructure is largest in the central mega-region and smallest in the eastern mega-region. Moreover, the estimated output elasticity in regard to the first-order neighboring public capital is about 0.11, which is even larger than that regarding public capital (0.09). Finally, a panel Granger causality test is conducted to investigate the nature of the possible causal relationship between public infrastructure and economic output in China. The results demonstrate that there exist strong bilateral causal relationships between public infrastructure and economic output in China. In particular, public infrastructure may influence economic output during a longer time horizon than economic output does for public infrastructure in China.
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Keywords
Public infrastructure, Granger causality test, Regional productivity, Panel data, Nonstationarity, China