Public infrastructure capital, scale economies and returns to variety

The first column of Table 1, which deals with the total public capital stock, refers to the
regional GDP categories, which are the dependent variables for the respective regressions. The
second column gives the estimates for the constant term, the third for the labour input (which refers to
the employment of the manufacturing sector), the fourth for the infrastructure variable, and the fifth
for the time trend. The next three columns give the usual measures of the regressions, the adjusted R
square, the error sum squares, and the standard error of the regression, respectively¹⁹. The last column
presents, under the h heading, the results for the Hausman specification test of the augmented
regression (however, the rest of the results refer to the original regression). As mentioned above, the
results for the dummy variables are not reported on here. The ‘total’ row gives the results for the sum
of regional GDP categories (including total manufacturing). The infrastructure coefficient appears to
be small in magnitude (0.036) and statistically insignificant. The h statistic shows that the hypothesis
of exogeneity for public capital cannot be rejected. Some of the categories of regional GDP seem to
have large infrastructure coefficients, which are also statistically significant. These are the Agriculture,
Banking, Housing, Public Administration, Services, and to some extent the Health GDP categories.
The signs of these coefficients in some cases is negative (Agriculture, Health, and Housing).
However, for all the cases where the infrastructure variable appears to be statistically significant the h
statistic shows that the hypothesis of exogeneity for public capital must be rejected. Thus, the overall
conclusion from this table is that the infrastructure variable does not seem to have an impact on
regional GDP, and this is inferred from the results for the aggregate GDP category and for the
individual sub-categories.

Table 1 The effect of total public capital (G total) on the GDP of the non-manufacturing sectors of
Greece, 1982-1991

Equation for per capita regional income (ln)

¹⁹ These measures are from the formulation with a constant term and n-1 dummy variables.

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