Productivity and Infrastructure in the Italian Regions

We address the issue of whether public infrastructure play an important role in determining factor productivity in Italy, and we show that the evidence is mixed. Public capital is significant in explaining output in most cases. However, when the attention is drawn on the long-run properties of the data, or when care is taken to rule out contemporaneous short-run effects, then public capital results to be either non-significant, or significant but of negligible importance.We conclude that the influence of infrastructure on output is probably due, to a great extent, to short-run demand-side phenomena