How Productive are Public Capital, Private Capital, Human Capital and R&D in the U.S.?

Time series studied have found that the impact of public capital on postwar U.S. private sector output and productivity is surprisingly large. These studies neglect the economic effects of human capital and R&D, which I add to the aggregate production function. Omission of human capital and R&D leads to omitted variables bias in the public capital output elasticity. With the expanded model the estimated output elasticity for public capital is roughly half of previous estimates like that of Aschauer (1989). Public capital explains only 27 % of the post-1973 prodcutivity slowdown.