Employment and Public Capital in Spain

• Autores: Xavier Raurich Puigdevall, Valeri Sorolla, Héctor Sala
• Localización: Working papers (Universitat Autònoma de Barcelona. Departament d'Economia Aplicada), Nº. 4, 2002
• Idioma: inglés
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• Resumen

  • This paper analyses the e¿ects on employment of increasing the stock of public capital. To this end, we derive a wage equation so that wages are endogenized. This allows us to show that, by means of a higher elasticity of labour demand with respect to wages, a rise in public capital increases employment. The estimation of a structural model for the Spanish private sector tests and con¿rms empirically this relationship. The results show that an increase in public capital has a signi¿cant and positive direct in- ¿uence on employment, and indirect e¿ects derived from lower wages and higher economic growth. Finally, we undertake a simulation exercise to assess the long run e¿ects on employment and economic growth of increasing public capital.