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Public Investment and Private Sector Growth The Economic Benefits of Reducing America’s “Third Deficit” Dxid Alan Aschauer kxxwmic policy InstihCe Public Investment and Private Sector Growth The Economic Benefits of Reducing America’s “Third Deficit” David Alan Aschauer Economic Policv Institute 1730 Rhode Island Ave., NW, Suite 200, Yi ’ashington, DC 20036 ISBN O-944826-38-5 David Alan Aschauer is the Elmer W Campbell Professor of Econom- ic-s :tt 13xes College III I.e\x%ton. 1Iaine. He is currently working on a book on the natlc)n\ infrzstructure needs sponsored b!. the TWzntieth Centuq. hnti. Table of Contents EXECUTlS’E SUlMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 INTRODL’CTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 INFRASTRlKTURE AND THE ECONOhn’: TRENDS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SOLVING THE MYSTERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INFRASTRLJCTURE AND THE ECONOILPr’: CONCEPTS . . . . . . . . . . . . . . . . . . . . . . . . 1_’ E\‘IDENCE FOR THE HYPOTHESIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . It WIAT IF WE HAD I~NVESTED hIORE IN PUBLIC INFIWSTI~ICTI~liE? . . . . . . . . . . .I‘0 3-i CRITICISMS A