Are Government Activities Productive? Evidence from a Panel of U.S. States

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Abstract
Using panel data for the 48 contiguous U.S. states in each year between 1970 and 1986, this paper investigates the extent to which government capital and current government services contribute to private production. The paper finds fairly strong evidence that current government educational services are productive but no evidence that the other government activities considered are productive. Indeed, government capital often has statistically significant negative productivity. The results are robust across the many specifications considered.

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