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Infrastructure and productivity in Latin America: is there a relationship in the long run?

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  • Mussolini, Caio Cesar
  • Kuhl Teles, Vladimir

Abstract

This article analyses the relationship between infrastructure and total factor productivity (TFP) in the four major Latin American economies: Argentina, Brazil, Chile and Mexico. We hypothesise that an increase in infrastructure has an indirect effect on long-term economic growth by raising productivity. To assess this theory, we use the traditional Johansen methodology for testing the cointegration between TFP and physical measures of infrastructure stock, such as energy, roads, and telephones. We then apply the Lütkepohl, Saikkonen and Trenkler Test, which considers a possible level shift in the series and has better small sample properties, to the same data set and compare the two tests. The results do not support a robust long-term relationship between the series; we do not find strong evidence that cuts in infrastructure investment in some Latin American countries were the main reason for the fall in TFP during the 1970s and 1980s.

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Paper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 246.

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Date of creation: 22 Feb 2010
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Handle: RePEc:fgv:eesptd:246

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  1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 23(2), pages 177-200, March.
  2. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 48(3), pages 253-77, August.
  3. Röller, Lars-Hendrik & Waverman, Leonard, 2000. "Telecommunications Infrastructure And Economic Development: A Simultaneous Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2399, C.E.P.R. Discussion Papers.
  4. Lütkepohl, Helmut & Saikkonen, Pentti & Trenkler, Carsten, 2000. "Comparison of tests for the cointegrating rank of a VAR process with a structural shift," SFB 373 Discussion Papers, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,10, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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  6. Ferreira, Pedro Cavalcanti Gomes & Araújo, Carlos Hamilton Vasconcelos, 2006. "On the Economic and Fiscal Effects of Infrastructure Investment in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 613, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  7. Lutkepohl, Helmut & Saikkonen, Pentti, 2000. "Testing for the cointegrating rank of a VAR process with a time trend," Journal of Econometrics, Elsevier, Elsevier, vol. 95(1), pages 177-198, March.
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  12. Helmut Lütkepohl & Pentti Saikkonen & Carsten Trenkler, 2004. "Testing for the Cointegrating Rank of a VAR Process with Level Shift at Unknown Time," Econometrica, Econometric Society, Econometric Society, vol. 72(2), pages 647-662, 03.
  13. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 70(2), pages 443-477, April.
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