EFFECTS OF PUBLIC CAPITAL ON ECONOMIC GROWTH AND PRODUCTIVITY IN SPAIN DURING THE PERIOD 1980-2007

In line with the existing literature, the main aim of this study is to analyse the effects of public capital on growth in the Spanish regions for the period 1980-2007. The methodology used adopts a parametric approach following the recommendations intended to eliminate the effects of demand and estimate only the medium-term impacts, ultimately eliminating any possible inverse causality relationship. The estimates made put the elasticity of the productivity of labour with respect to the delays in investment in infrastructures at 0.183, while elasticity with respect to private investment stands at 0.294. This means it can be concluded that investment in public capital contributes to increasing productivity by approximately 62 per cent in the Spanish regions as a whole. Meanwhile, the analysis of the convergence of the estimated efficiency levels shows that the least efficient regions have benefited from the technology existing in the regions closest to the efficiency frontier. Finally, some reflections are compiled on the role investment in public capital can play in the context of a crisis like the current one, together with other pillars incorporated into the debate, such as fiscal consolidation and structural reforms.