Abstract:

The aim of this study is to empirically investigate whether public capital is provided optimally both at the national and regional levels in Turkey. Our empirical work shows that public capital significantly contributes to the production of private manufacturing sector. Nonetheless, the findings also indicate that marginal productivity of public capital is smaller than that of private capital, suggesting that public capital is over-provided at the national level. At the regional level however, the picture is quite different. While public capital is over-provided for the provinces with high performance in terms of income, it is less-provided for the provinces with low performance. These results may be taken to interpret that there exists no “efficiency vs. equality” trade-off for public investment policy, and thus public investment as a regional policy ought to be used for distributional (equality) purposes in Turkey

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