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Infrastructure investment and Canadian manufacturing productivity

This paper examines the relationship between Canadian public infrastructure and private output using a Constant Elasticity and Substitution-Translog (CES-TL) cost model to describe the interaction of the public and private sectors. The CES-TL was first specified by Pollak et al. (1984). We find public capital a substitute for private capital within the Canadian manufacturing sector. Additionally, the services of public capital enhance the productivity of private capital. Canadian manufacturing costs are characterized by economies of scale, indicating that less than optimal plant sizes dominated Canadian manufacturing sector during the study period. Advances in disembodied technical progress are also indicated.