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This article assesses the productivity effects of infrastructure operation and maintenance (O&M) spending by state and local governments in the 48 contiguous U.S. states over the period 1978-2000. We explicitly account for transboundary spillovers of capital and O&M spending and follow a semiparametric methodology that allows us to estimate state-specific output elasticities. We find strong evidence that in all 48 states the cross-state spillover effects of O&M outlays on productivity exceed their within-state impacts and are substantially higher than the spillover effects of capital expenditure. ( JEL C14, E22, E62, H76, O11, O47, R11) [ABSTRACT FROM AUTHOR]

Data published by the US Congressional Budget Office show that over the last fifty years expenditures for infrastructure’s operations and maintenance (O&M) have roughly equalled those for new capital. We use this data set to investigate the productive impact of public infrastructure spending, taking into account its composition for each government level. We find that a rise (fall) in infrastructure expenditures by states and localities (the federal government) would enhance future productivity growth and that the rise in state and local spending should mainly come from additional O&M outlays in the transport sector. [ABSTRACT FROM PUBLISHER]