Assessing the Public Capital Contribution to Growth. An Application to Italy

We provide a model of the relationship between public capital and productivity in the private sector. The empirical evidence on the public capital contribution to growth is mixed. This evidence generally has been obtained in a single equation framework. We deal with this topic in a multi-equation framework, using a choice-theoretic multi-sectoral model of the Italian economy. Historical simulation results show that core- infrastructure-oriented-policies may boost economic growth by improving system efficiency. The magnitude and the modus operandi of this contribution are made in such a manner that financing and crowding out problems appear of second order.