Estimates of Optimal Public Capital Stocks in Japan Using a Public Investment Discount Rate Framework

The purpose of this paper is to empirically assess the optimality of the level of public capital in Japan. We use a methodological approach based on Burgess's (1988) procedure for calculating the public discount rate. This approach involves estimating a production function, but does not necessarily require utility function estimation. The results indicate that, although the Japanese economy experienced a public capital deficiency over the period 1960-1982, public capital moved toward optimal levels throughout the period. Key words: Public discount rate, optimal public capital, Japanese economy