This paper by Douglas Holtz-Eakin examines the relationship between public-sector capital accumulation and private sector productivity, a topic that has garnered significant attention in recent years. The author revisits empirical studies using state-level data, which have suggested a substantial link between public sector capital and private productivity. However, Holtz-Eakin's analysis using standard econometric techniques to control for unobserved, state-specific characteristics finds no significant impact of public-sector capital on private sector productivity. The results are consistent with those of Hulten and Schwab, who used growth accounting techniques, which effectively control for state-specific effects. Region-level estimates are also identical to those from state data, indicating no significant spillover effects across states. The paper concludes that the findings of previous studies with large, positive effects are likely artifacts of inappropriate econometric frameworks, and that the economic benefits of public capital are negligible beyond direct provision of amenities.This paper by Douglas Holtz-Eakin examines the relationship between public-sector capital accumulation and private sector productivity, a topic that has garnered significant attention in recent years. The author revisits empirical studies using state-level data, which have suggested a substantial link between public sector capital and private productivity. However, Holtz-Eakin's analysis using standard econometric techniques to control for unobserved, state-specific characteristics finds no significant impact of public-sector capital on private sector productivity. The results are consistent with those of Hulten and Schwab, who used growth accounting techniques, which effectively control for state-specific effects. Region-level estimates are also identical to those from state data, indicating no significant spillover effects across states. The paper concludes that the findings of previous studies with large, positive effects are likely artifacts of inappropriate econometric frameworks, and that the economic benefits of public capital are negligible beyond direct provision of amenities.