Public capital

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Public capital is the aggregate body of government-owned assets that are used as a means for productivity.

gas utilities, and telecommunications.[2]
Often, public capital is defined as government outlay, in terms of money, and as physical stock, in terms of infrastructure.

Current state in the U.S.

In 1988, the U.S.

electric grid, an untapped renewable energy
sector, and inadequate school facilities all have justified additional funding in public capital investment.

The

Schools require a staggering $127 billion to bring facilities to decent operating condition. Billions of gallons of untreated sewage continue to be discharged into U.S.’s surface waters each year.[5]

Economic growth

One of the most classic

developing nations. Analyzing OECD and non-OECD countries’ real-GDP growth rates from 1960 to 2000 with public capital as an explanatory variable (not using public investment rates), Arslanalp, Borhorst, Gupta, and Sze (2010) show that increases in the public capital stock does correlate with increases in growth. However, this relationship depends on initial levels of public capital and income levels for the country. Thus, OECD countries witness a stronger positive link in the short term while non-OECD countries experience a stronger positive link in the long term. Hence, developing countries can benefit from non-concessional foreign borrowing to finance high-prospect public capital investments.[7]

Given this relationship of public capital and productivity, public capital becomes a third

input in the standard, neoclassical production function
:

where:

Yt represents real aggregate output of goods and services of the private sector
At represents productivity factor or Hicks-Neutral technical change
Nt represents aggregate employment of labor services
Kt represents aggregate stock of nonresidential capital
Gt represents flow of public capital stock (assuming services of public capital are proportional to public capital)[8]

In this form, public capital has a direct influence on productivity as a third variable. Additionally, public capital has an indirect influence on

natural monopolies; and the common resource problem such as congestion and overuse.[6]

Empirical models that attempt to estimate the public investment and economic growth link involve a wide variety including: the

fixed costs and transport costs lower with expanded infrastructure in localities and the resulting cluster of industries. As a result, economic activity grows along its pattern of trade.[6] Therefore, the importance of regional clusters and metropolitan economies
comes into effect.

Social benefit

Beyond economic performance, public capital investment yields returns in

parks; expanded water facilities aids in health and sanitation and environment such as reducing odor and sewer overflows.[1] Furthermore, infrastructure adds to community ambience and quality of place with livelier downtowns, vibrant waterfronts, efficient land uses, compact spaces for commerce and recreation.[11]

On the contrary, inadequate public capital impairs quality of life and social well-being. Over-capacity landfills lead to groundwater contamination, having deleterious effects on health. Deficient supply and quality of mass transit services impacts transit-dependents on their access to opportunity and resources. Increasing congestion in airports and roadways causes loss of discretionary time and recreational activities.

clean energy technology will contribute to U.S.’s future loss of prosperity on the global stage in terms of the carbon footprint and economy.[11]

Public capital initiatives

United States

Perhaps the largest contribution to the public works system in the U.S. came out of President Franklin D. Roosevelt’s New Deal initiatives particularly the creation of the Works Progress Administration (WPA) in 1935. At a time of a deep economic crisis, the WPA employed at its peak 3.35 million unemployed heads-of-households to work in rebuilding the country. The program helped construct millions of roads, bridges, parks, schools, hospitals, and levees while also providing educational programs, childcare, job training, and medical services. The overall public spending level for the program, unprecedented at the time, was $4.8 billion ($76 billion in 2008 dollars), and helped to stimulate the economy through public works projects.[13]

Since then, the U.S. has contributed to other large infrastructure programs including the

transmission lines across the U.S. Though currently facing aging facilities and equipment, this public capital investment has ubiquitously reached millions of homes and businesses.[15][16]

Recently, the American Recovery and Reinvestment Act (ARRA) is another example of large public capital investment. Of the $311 billion in appropriations, about $120 billion are set aside for crucial investment in Infrastructure and Science and Energy. Some of ARRA's aims include smart grid technology, retrofitting of homes and federal buildings, automated aviation traffic control, advancing freight and passenger rail services, and upgrading water and waste facilities.[17]

Other countries

Worldwide, transformative public capital investments are taking place.

combined cycle gas-turbined (CCGT) power plants to meet its nation's growing energy needs.[21]

See also

References

  1. ^ a b c d e f Aschauer, D. A. (1990). Why is infrastructure important? Conference Series [Proceedings]. Federal Reserve Bank of Boston. Pp. 21-68.
  2. ^ a b Tatam, J. A. (1993). The Spurious Effect of Public Capital Formation on Private Sector Productivity. Policy Studies Journal, Vol. 21.
  3. ^ Pietroforte, R., & Miller, J. (2002). Procurement methods for US infrastructure: historical perspectives and recent trends. Journal of Building Research & Information, 30(6), 425-434.
  4. ^ Orszag, P. R. (2008). Investing in Infrastructure. Washington, DC: Congressional Budget Office.
  5. ^ American Society of Civil Engineers. (2009). Report Card for America’s Infrastructure. Retrieved from "2009 Report Card for America's Infrastructure". Archived from the original on 2010-03-17. Retrieved 2011-07-14.
  6. ^ a b c d e f Haan, J., Romp, W., and Sturum, J.E. (2007). Public Capital and Economic Growth. World Bank, Preliminary Paper.
  7. ^ a b Arslanalp, Serkan; Bornhorst, Fabian; Gupta, Sanjeev; Sze, Elsa (1 July 2010). "Public Capital and Growth" (PDF). International Monetary Fund. Retrieved 14 March 2023.
  8. ^ Aschauer, D. A. (1989). Is Public Expenditure Productive? Journal of Monetary Economics, Vol. 23. Pp. 177-200.
  9. ^ Eberts, R. (1990). Public infrastructure and regional economic development. Economic Review (00130281), 26(1), 15.
  10. ^ Crain, W.M. and Oakley, L.K. (1995) The Politics of Infrastructure. Journal of Law and Economics Vol. 38, no. 1
  11. ^ a b Mark, M., Katz, B., Rahman, S., and Warren, D. Brookings MetroPolicy: Shaping A New Federal Partnership for a Metropolitan Nation.
  12. ^ Puentes, R. (2008). A Bridge to Somewhere: Rethinking American Transportation for the 21st Century. Brookings Institution Metropolitan Policy Report: Blueprint for American Prosperity series report.
  13. ^ Gabriel, J. (2008). A Twenty-First Century WPA. Social Policy, 38(2), 38-43.
  14. ^ Griggs, F. E. (2003). Perspectives in Civil Engineering. 1852-2002: 150 Years in Civil Engineering in the United States. American Society of Civil Engineers. Edited by Jeffrey S. Russell. Pp. 111-122.
  15. ^ Stuller, J. (2009). Reinventing Edison. Conference Board Review, 46(1), 42-49. Retrieved from EBSCOhost.
  16. ^ U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. (2009). Power to the Plug: An Introduction to Energy, Electricity, Consumption, and Efficiency. Pp. 1-4.
  17. ^ "House Committee on Appropriations - Republicans". House Committee on Appropriations - Republicans. Retrieved 2023-03-14.
  18. ^ Felon, C, Ramella, F, and Zuger, H. (2009) China’s Rail Revolution. ABB Review: Railways and Transportation. Vol. 2, Issue 10. Pp. 19-24.
  19. ^ "Development and investment costs of offshore wind power". Archived from the original on 2011-07-25. Retrieved 2011-07-14.
  20. ^ "Page Not Found". Hong Kong International Airport. {{cite web}}: Cite uses generic title (help)
  21. ^ "Cc-chile". Archived from the original on 2013-01-26. Retrieved 2014-04-13.
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