The Robustness of the Effects of Public Investment in Infrastructure on Private Output: Evidence for Germany

This paper investigates the effects of public investment in infrastructure on private output for Germany. Using a multivariate framework we explore the impact of a diverging selection of variables on the ensuing estimates and document confidence intervals computed following the bootstrap procedure. Our results suggest that the effect of public investment in infrastructure is positive on GDP and private investment while the labor market is negatively affected. However, the size of the estimated effects strongly depends on the choice of the variables. Furthermore, an investigation of a recursive estimation reveals that the estimated effects decrease over time.