Public Infrastructure and Productivity: Updating the Canadian Case

To account for state-differences, however, they include the population and a measure of the average industrial mix of each state instead of state dummies to preserve the long-run relationship between the factors of pro- duction. [...] He finds the elasticity of labour to be much larger (0.911), the elasticity of private capital to be much smaller (0.106), and the elasticity of public capital to be negative and not significantly different from zero. [...] Harchaoui and Tarkhani (2003) estimate industry demand and cost functions for the 1961–2000 period, allowing them to decompose multifactor productivity growth, calculate the marginal benefits of public capital for each industry, and determine the effects of public capital on demand for labour, capital and interme- diate inputs. [...] In this function, Macdonald uses a combination of “roads and vehicles, which allows the impact of public capital to be approximated as proportional to the input share of transportation services.” He finds varying cost elasticities for public infrastructure that depend on the specifica- tion and weight of the dependent variable. [...] 16 Statistics Canada defines infrastructure as “the physical structures and systems that support the production of goods and services and their delivery to and con- sumption by governments, businesses and citizens” and notes that it “represents a set of assets that are used by other factors of production (labour and capital) in the production, distribution or consumption of goods and services” (St.