The objective of this paper is to evaluate the short- and long-term effects of public investment in infrastructure on aggregate output, labour and capital formation in the private sector. The problem is analysed in a dynamic multivariate framework, which allows for explicit consideration of feedback among all the variables. This approach generalizes the current literature, which relies on a single-equation model to estimate production functions and implicitly assumes the absence of feedback relationships. For the Spanish economy, our results suggest positive long-term effects of public investment on the private sector variables.

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In this paper we address the question of how telecommunications affect economic growth, by estimating the effect of direct investment in telecommunications infrastructures on aggregate output, employment, and investment in Spain. In contrast with previous studies, the problem is analyzed in a dynamic multivariate framework which allows for explicit consideration of feedbacks among all the variables. We find significant effects of the investment in infrastructures of telecommunications on aggregate output, employment and investment which extend for several years. This might justify a policy for stimulating investment in this sector.