Contrary to simple theoretical predictions, previous empirical research has found that state government public spending … preferences for public goods and intergovernmental grant receipts, and this correlation has likely biased the existing literature … demonstrate that constituent private income and grants have similar effects on public spending. …

This paper employs Roback's locational-equilibrium model of public-goods pricing, cross-sectional data from the Census … of Population and Housing, and SMSA-level estimates of public capital stocks in order to examine the productive … contribution of public capital. I find that public capital has a small positive impact on private output. …