Returns to Investment in Navigation Infrastructure: An Equilibrium Approach

Harry H. Kelejian and Dennis P. Robinson , The Annals of Regional Science 34(1) , 83-108 , March 2001.

We argue that there are serious biases in public infrastructure productivity estimates which are based on a production function, or a cost function framework. These biases arise because public infrastructure has important effects on the demands, as well as prices of the factors of production. In this study we estimate the productivity effects of investment in navigation infrastructure in a systems framework. Our results strongly suggest a significant productivity effect of such investments.

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