This article uses a vector auto-regressive/error correction mechanism (VAR/ECM) approach to evaluate empirically the disaggregated effects of public capital formation on private sector performance at the industry level. The authors estimate models for the U.S. economy and for 12 industries covering the whole spectrum of economic activity in the United States. Empirical results at the aggregate level indicate that public investment affects positively private inputs and private output. Empirical results at the industry level suggest that public investment tends to shift the sectoral composition of employment toward construction and transportation and the composition of private investment toward manufacturing, public utilities, and communications. Furthermore, public investment tends to shift the composition of private output toward construction, durable manufacturing, transportation, and wholesale trade. Accordingly, the empirical results suggest that public investment seems to be a powerful instrument to enhance long-term private sector performance but that it does so in a way that is rather unbalanced across industries.

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• Economia e Gestão - Ciências Sociais
• Ciências Políticas - Ciências Sociais