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33 Cato J. 1 (2013)
Is Public Expenditure Productive: Evidence from the Manufacturing Sector in U.S. Cities, 1880-1920

handle is hein.journals/catoj33 and id is 1 raw text is: IS PUBLIC EXPENDITURE PRODUCTIVE?
EVIDENCE FROM THE MANUFACTURING
SECTOR IN U.S. CITIES, 1880-1920
Melissa Yeoh and Dean Stansel
This article provides the first examination of the relationship
between public expenditures and labor productivity that focuses on
municipalities, rather than states or nations. We use data for
1880-1920, a period of rapid industrialization in which there were
both high levels of public infrastructure spending and rapid grovth
of productivity. We use a simple Cobb-Douglas production finetion
to model labor productivity in the manumfacturing sector, letting total
factor productiAt  depend on productive public expenditure by
city governments-that is, on public spending that may raise the pro-
ductty of labor and encourage human capital accumulation.
Using a data set of 45 of the largest cities in the United States, we
find no statistically significant relationshlip behveen productive public
expenditure and labor productivty in the manuifadurfing sector during
this period. These findings are robust to three different econometric
approaches. We do, however, find a strongly positive and statistically
significant relationship between private capital and labor productivity.
Our results are consistent wvith those of much of the literature
Catolo,,nal, Vol. 33, No. 1 (Winter 2013). Copyight © Cato Institute. All iights
reseirxed.
Melissa Yeoh is ar Assistant Professor of Economics at Berry College, and Dean
Stmasel is an Associate Professor of Economics at Florida Gulf Coast University.
They thank Noel Campbell, Garth Heutel, Brian McNamara, Mitch Mitchell, and
Bob Mulligan for helpful comments on a pre-vious version of this article and Amny
Weisgarber for research assistnnce. Yeoh's work was supported by the Kik
Dornbush Summer Research Giant at Vanderbilt University. She thfmks Jeremy
Atack, Martha Bailey, Bill Collins, Tomas C rcek, Yauqin Fan, William Hutchinson,
Bob Margo, Mototsugu Shintani, md John W'hVaruzer for comments on earlier drafts.

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