Productivity effects of public capital maintenance: Evidence from U.S. states

This article assesses the productivity effects of infrastructure operation and maintenance (O&M) spending by state and local governments in the 48 contiguous U.S. states over the period 1978-2000. We explicitly account for transboundary spillovers of capital and O&M spending and follow a semiparametric methodology that allows us to estimate state-specific output elasticities. We find strong evidence that in all 48 states the cross-state spillover effects of O&M outlays on productivity exceed their within-state impacts and are substantially higher than the spillover effects of capital expenditure. (JEL C14, E22, E62, H76, O11, O47, R11).