This paper uses a VAR approach to investigate the effects of public investment on private-sector performance in the United States. This approach is consistent with the argument that the analysis of these effects requires the consideration of dynamic feedbacks among the different variables. Estimation results suggest that all types of public investment have a positive effect on private output. Core infrastructure investment in electric and gas facilities, transit systems, and airfields, as well as in sewage and water supply systems display the highest rates of return, 16.1% and 9.7%, respectively, closely followed by investment in educational, hospital, and other public buildings with 8.9%.
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