Alfredo M. Pereira

Is All Public Capital Created Equal

This paper uses a VAR approach to investigate the effects of public investment on private-sector performance in the United States. This approach is consistent with the argument that the analysis of these effects requires the consideration of dynamic feedbacks among the different variables. Estimation results suggest that all types of public investment have a positive effect on private output. Core infrastructure investment in electric and gas facilities, transit systems, and airfields, as well as in sewage and water supply systems display the highest rates of return, 16.1 and 9.7, respectively, closely followed by investment in educational, hospital, and other public buildings with 8.9.

Spillover effects of public capital formation: evidence from the spanish regions

Maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level, the issue of the possible existence of the regional spillovers from public capital formation has received little attention. The objective of this paper is to provide evidence on the possible existence of such spillovers. We consider the case of Spain and its seventeen regions. Our methodological approach consists in estimating an aggregate VAR model for Spain as well as seventeen region-specific VAR models in which both capital installed in the region and capital installed outside the region are allowed to play a role in enhancing regional output. The estimation results can be summarized as follows. The aggregate effects of public capital formation in Spain are important. They cannot, however, be captured in their entirety by the direct effects in each region from public capital installed in the region itself. When for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results. Furthermore, the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation. Ultimately, this paper establishes the relevance of both capital installed in each region and spillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation. In doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects.

Survey of dynamic computational general equilibrium models for tax policy evaluation

Abstract Perhaps the most active area of research in the field of computable general equilibrium tax models involves the addition of genuine dynamics to the behavior of both consumers and producers. Such model enhancement in the direction of dynamics is necessary to satisfactorily capture the effects of such tax alternatives as the adoption of an expenditure tax or the integration of the corporate and personal tax systems. This paper surveys 11 models that include at least some dynamics in their structure. It treats the issue of incorporating dynamics into the models, and also discusses different computational and implementation approaches. Finally, it includes a dynamic computational general equilibrium model of corporate tax integration that indicates the potential importance of modeling dynamic choice.

On The Effects of Public Investment on Private Investment: What Crowds in What?

This article provides an empirical investigation of the effects of public investment on the evolution of private investment in the United States. It is based on the impulse response analysis associated with vector auto-regressive (VAR) estimates. The empirical results suggest that at the aggregate level, public investment crowds in private investment. Disaggregating private investment shows that the crowding-in effect of public investment is strong for equipment and only marginal for structures. This crowding-in effect on private equipment is particularly strong in the cases of industrial equipment and transportation equipment. In fact, public investment marginally crowds out private investment in information equipment. A final look at the effects of different types of public investment on the different types of private investment suggests that in about one third of the cases, public investment variables crowd out private sector variables. More important, the aggregate results often hide a wide diversity of effects.

Public highway spending and state spillovers in the USA

The empirical results reported in this paper suggest that only about 20% of the aggregate effects of public investment in highways in the US are captured by the direct effects on each state output of public investment in the state itself. The remaining 80% correspond to the spillover effects from public investment in highways in other states. This result may provide an answer to the paradox in the literature that the findings of large effects at the aggregate level have not been matched at the regional level. This is because regional analysis has typically ignored the possible existence of spillover effects.

Public Capital Formation and Regional Development in Spain

This paper uses a vector autoregression (VAR) approach to evaluate the effects of public investment on private sector performance in Spain. Empirical results suggest that public investment positively affected private investment, employment, and output at both aggregate and regional levels. The regions that benefited the most from public investment in the last two decades were Cataluna, Madrid, and Pais Vasco. These regions are among the largest economic areas in the country and among the ones with the highest GDP per capita. Accordingly, public investment, while an important factor for aggregate economic growth, has also been a source of increasing regional asymmetries. Copyright 1999 by Blackwell Publishing Ltd

The debt crisis: Lessons of the 1980s for the 1990s

One of the salient characteristics of the 1980s is the growth collapse of the Latin American debtor countries. The debt-overhang literature claims that the debt crisis is the main reason for the growth collapse. However, previous empirical work has failed to support this hypothesis. We reexamine this hypothesis further using simulation and econometric methods. We find that once we account for the effects of social inequality on government policy and consumption, the burden of servicing the debt becomes an important factor in explaining the collapse in investment and output growth in Latin America. We draw some conclusions for the 1990s.

Export Growth and Domestic Performance

A VAR approach is used to analyze the effects of export growth on the evolution of GDP, domestic employment, and investment in 39 economies. The results strongly support the export-led growth hypothesis. Export growth affects GDP growth positively in 30 countries. In six countries, all of them inward-looking, the effects are negative. For these countries, and for these countries alone, export growth has a negative effect on the evolution of both domestic employment and investment. This also suggests the importance of the indirect effects of exports on GDP growth.

On the Impact of Public Investment On the Performance of U.S. Industries

ARTICLE PUBLIC F NANCE REVIEW Pereira, Andraz / THE IMPACT OF PUBLIC INVESTMENT This article uses a vector auto-regressive/error correction mechanism (VAR/ECM) approach to evaluate empirically the disaggregated effects of public capital formation on private sector performance at the industry level. The authors estimate for the U.S. economy and for 12 industries covering the whole spectrum of economic activity in the United States. Empirical results at the aggregate level indicate that public investment affects positively private inputs and private output. Empirical results at the industry level suggest that public investment tends to shift the sectoral composition of employment toward construction and transportation and the composition of private investment toward manufacturing, public utilities, and communications. Furthermore, public investment tends to shift the composition of private output toward construction, durable manufacturing, transportation, and wholesale trade. Accordingly, the empirical results suggest that public investment seems to be a powerful instrument to enhance long-term private sector performance but that it does so in a way that is rather unbalanced across industries.

Import tariffs and growth in a small open economy

Abstract In this paper we study the relationship between tariff structure, growth and welfare for a small, open country with endogenous growth induced by human capital accumulation. Using a model with trade in consumption and two investment goods, we consider the short- and long-run effects of a permanent unanticipated increase in the tariff rates under different replacement regimes, i.e. lump-sum transfer or investment tax credit. We show that most tariffs reduce growth, even in the short run. Also, all tariffs are welfare-reducing in the long run, but some may improve welfare in the short run. We find that, in general, differential tariffs are welfare-optimal. Starting from a uniform tariff structure, a revenue-neutral tariff reform may, therefore, increase growth and welfare in the long run. The structure of the optimal differential tariff varies, however, depending on the replacement regime.