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This article examines the effects of public infrastructure on the productive performance of 12 two-digit Canadian manufacturing industries. A flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961–1995. The effects of public infrastructure on productivity are measured in terms of both cost-saving (dual) and output-augmenting (primal) measures. We also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital. The empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries. The public capital serves as a substitute for both private capital and labor in most industries. The rates of return to public capital are significant and vary over the years.

Part 1 Public sector budgeting in the United States: the federal budget - concepts and uses the federal budget process federal budget trends - the record, Kamal Desai budget decisions in a federal system the fiscal structure of the United States, Ronald Shadbegian. Part 2 Comparative budgeting - case studies: public sector service provision and the form of government budget making in Canada, Gladstone Hutchinson fiscal federalism in the federal republic of Germany, Ute Schumacher budgeting in the United Kingdom, Peter Smith centralized versus decentralized provision and the size of government, Ronald Shadbegian. Part 3 Budget policy: budget policy - an overview public saving and the economy public capital formation and growth.

Increasingly, economists and state and local policymakers see a broader link between declining regional competitiveness and the deterioration of highways, bridges, water and sewer systems, and other public infrastructure. Supporters of active industrialization policies point out that one way a region can regain its competitive edge is to upgrade its infrastructure. The Clinton Administration, citing the lack of infrastructure investment as a cause of sluggish national economic growth, advocates massive spending hikes to repair existing public capital and to invest in new public capital. The groups supporting this approach rely on recent empirical evidence showing that public infrastructure investment generally makes a significant contribution to productivity and output [2; 4; 5; 12; 16; 18]. Existing studies, however, report disparate results about the size of the effect of public capital on economic growth. Aschauer [2], using aggregate time-series data, estimated output elasticities with respect to public capital ranging from 0.39 to 0.56. Munnell [18] updated Aschauer's study and reported an elasticity of 0.33 for labor productivity with respect to public capital. The magnitude of the estimated elasticities and the associated marginal product of public capital in these two pioneer studies are generally accepted as extraordinarily large. The debate on their size is extremely lively. Two fundamental issues dominate the debate. First, Aaron [1] draws attention to the implausible nature of the earlier results by comparing the marginal productivities of public and private capital implied by these studies. He finds that the implied marginal productivity of public capital is five times greater than that of private capital. Second, McGuire [14] and Eisner [6] contend that the empirical evidence from the aggregate time-series data is not compelling. McGuire argues that the established statistical relationship may not imply a causal connection between infrastructure and economic performance. Eisner also questions the causal link by suggesting that one cannot

The decade of the 1970s has been characterized by a significant deterioration of the nation's public capital stock. From 1970 to 1978 the real value of the total stock of public capital at the regional level (SMSA) has declined, on average, by 41 percent. Likewise, the real value of the stock of sewers and sanitation facilities, highways and roads, and water supply and treatment facilities has declined by 39, 45 and 48 percent.' The size of this decay has caused concern among regional policy makers since such deterioration may have an adverse effect on regional growth. Regional economists have long considered public capital to play an important role in regional economic development. Although public investment does not guarantee that regional growth will occur economists view it as being able to create the necessary foundation for regional economic and social activity. As suggested by Nijkamp, public investment can have both a short and long term effect on regional growth [22]. The short term effect results from the direct effect of public capital on the production activities of private industry. Meade suggests that public capital can be viewed as an input in the production process of private industry that contributes independently to firms' output [21]. However, it is a unique input since firms do not purchase public capital on a per unit basis as they do private capital and labor. Rather, local governments supply public capital to firms in return for a lump sum property tax payment. The political process, in which private industry is assumed not to play a significant role, determines the amount of public capital supplied to private industry. Hence, if firms have no direct control over how much public capital local governments supply to them, then public capital enters the production process as an unpaid, fixed input. As such, public capital has a direct effect on firms' variable costs and profits.2 The favorable effect of public investment on variable costs and profits may induce exiting

During the first few years of Israel's existence, its economic planners placed major emphasis on progress towards the solution of basic long-run problems. These problems concerned economic development, economic absorption of mass immigration, and the economic burden of large defense outlays. While the short-run problem of the unfavorable trade balance was not ignored, it was relegated to second place in Israeli economic planning. A large-scale inflow of unilateral payments enabled the economic planners to carry on their long-run objectives without having to worry too much about the current deficit in the balance of payments. It was generally assumed that once the primary goals were reached, the balance of payments problem would take care of itself. In recent years, however, there has been a shift in emphasis. State planners are still concerned with the long-run objectives, but are being urged constantly by independent economists to give higher priority in the formulation of investment and other policies to the pressing short-run problem. Perhaps the most important reason for this shift is the prospect of a sharp decline in the inflow of capital within the next few years. At the rate at which the German reparations to Israel are being used up, they will be exhausted by 1963.1 Private contributions and transfers as well as public capital import will also taper off before long. This decline will seriously interfere with all phases of domestic production, since two thirds of Israel's imports are currently financed by capital import, and local production depends heavily on imported raw materials, spare parts, and fuel.2 The only way to minimize the impact on the economy of the transition to a self-supporting stage is by increasing exports.