The Contribution of Publicly Provided Inputs to States' Economies

We specify a regional production function that, in addition to labor and private capital, includes two publicly provided inputs highways and education. We employ a panel data set consisting of annual observations on the 48 contiguous states from 1969 to 1983 to estimate input elasticity coefficients under a specification that allows for differences over time and across states. We find that both of the publicly provided inputs have a significant and positive effect on output. Our results support the policy conclusion that publicly provided infrastructure is an important element of economic growth.