January 1, 1997

The impact of public infrastructure capital on the private sector of the Netherlands; an application of symmetric generalized McFadden cost function

This paper expands the symmetric generalized McFadden cost function by incorporating public capital as an unpaid fixed input, and estimates the new function using Dutch sector data for the post-World War II period.

Several elasticities concerning public infrastruc-ture are estimated in order to uncover the productivity effects of public infrastructure. We conclude that especially the sheltered sector of the Dutch economy benefits from infra-structure investment. Experimenting with several variants of the model reveals that this outcome is robust. However, despite these unambiguous results, the relationship between private inputs and public infrastructure is unclear. Their estimated elasticities alter sign during the estimation period.