Analysing the impact of public capital stock using the NEG wage equation: a panel data approach

摘要

This paper examines the relationship between the level of public infrastructureudand the level of productivity using panel data for the Spanish provinces over the period 1984-2004, a period which is particularly relevant due to the substantial changes occurring in the Spanish economy at that time. The underlying model used for the data analysis is based on the wage equation, which is one of a handful of simultaneousudequations which when satisfied correspond to the short-run equilibrium of NewudEconomic Geography theory. This is estimated using a spatial panel model with fixedudtime and province effects, so that unmodelled space and time constant sources ofudheterogeneity are eliminated. The model assumes that productivity depends on the level of educational attainment and the public capital stock endowment of each province. The results show that although changes in productivity are positively associated with changes in public investment within the same province, there is a negative relationship betweenudproductivity changes and changes in public investment in other regions.