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How productive is infrastructure?: new approach and evidence from rural India

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Zhang, Xiaobo
Fan, Shenggen

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Abstract

There have been competing arguments about the effect of public infrastructure on productivity in the literature. Level-based regressions generally show a much higher return to public capital than private capital, while difference-based regressions tend to find insignificant or even negative effects. To help reconcile this debate, this paper proposes that researchers should first test for causality in their data to check for length of lagged relationships and the existence of reverse causality, as a critical step before specifying a final model and estimating procedure on the relationship between the stock of capital and productivity growth. A newly developed system GMM method of estimation is proposed for this purpose. Second, a new method of estimating the relationship between the capital stock and productivity in level form is proposed that controls for possible endogeneity problems arising from reverse causation. These methods are illustrated using a unique set of pooled time-series, cross-section data for India. It is shown that infrastructure development in India is productive with an estimated impact lying between those obtained from level-based and difference-based estimates.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series EPTD discussion papers with number 84.

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Date of creation: 2001
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Handle: RePEc:fpr:eptddp:84

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Keywords: Public administration India.; Infrastructure (Economics) India. ;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gauchan, Devendra & Van Dusen, M. E. & Smale, Melinda, 2005. "On farm conservation of rice biodiversity in Nepal: a simultaneous estimation approach," EPTD discussion papers 144, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  2. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  3. Linacre, Nicholas A. & Koo, Bonwoo & Rosegrant, Mark W. & Msangi, Siwa & Falck-Zepeda, José & Gaskell, Joanne & Komen, John & Cohen, Marc J. & Birner, Regina, 2005. "Security analysis for agroterrorism: applying the threat, vulnerability, consequence framework to developing countries," EPTD discussion papers 138, International Food Policy Research Institute (IFPRI). [Downloadable!]
  4. Engel, Stefanie & Iskandarani, Maria & Useche, Maria del Pilar, 2005. "Improved water supply in the Ghanaian Volta Basin: who uses it and who participates in community decision-making?," EPTD discussion papers 129, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Fan, Shenggen & Chan-Kang, Connie, 2005. "Road development, economic growth, and poverty reduction in China:," Research reports 138, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  6. Cai, Ximing & McKinney, Daene C. & Rosegrant, Mark W., 2001. "Sustainability analysis for irrigation water management: concepts, methodology, and application to the Aral Sea region," EPTD discussion papers 86, International Food Policy Research Institute (IFPRI). [Downloadable!]
  7. Nagarajan, Latha & Smale, Melinda & Glewwe, Paul, 2005. "Comparing farm and village-level determinants of millet diversity in marginal environments of India: the context of seed systems," EPTD discussion papers 139, International Food Policy Research Institute (IFPRI). [Downloadable!]
  8. Linacre, Nicholas A. & Thompson, Colin J., 2005. "The emergence of insect resistance in Bt-corn: implication of resistance management information under uncertainty," EPTD discussion papers 136, International Food Policy Research Institute (IFPRI). [Downloadable!]
  9. Linacre, Nicholas A. & Gaskell, Joanne & Rosegrant, Mark W. & Falck-Zepeda, José & Quemada, Hector & Halsey, Mark & Birner, Regina, 2005. "Analysis for biotechnology innovations using Strategic Environmental Assessment (SEA):," EPTD discussion papers 140, International Food Policy Research Institute (IFPRI). [Downloadable!]
  10. Jaffe, Gregory, 2006. "Comparative analysis of the national biosafety regulatory systems in East Africa:," EPTD discussion papers 146, International Food Policy Research Institute (IFPRI). [Downloadable!]
  11. Linacre, Nicholas A. & Whiting, Steven N. & Angle, J. Scott, 2005. "Incorporating project uncertainty in novel environmental biotechnologies: illustrated using phytoremediation," EPTD discussion papers 132, International Food Policy Research Institute (IFPRI). [Downloadable!]
  12. Nagarajan, Latha & Smale, Melinda, 2005. "Local seed systems and village-level determinants of millet crop diversity in marginal environments of India:," EPTD discussion papers 135, International Food Policy Research Institute (IFPRI). [Downloadable!]
  13. Rodgers, Charles & Hellegers, Petra J.G.J., 2005. "Water pricing and valuation in Indonesia: case study of the Brantas River Basin," EPTD discussion papers 141, International Food Policy Research Institute (IFPRI). [Downloadable!]
  14. Smale, Melinda & Zambrano, Patricia & Falck-Zepeda, José & Gruère, Guillaume, 2006. "Parables: applied economics literature about the impact of genetically engineered crop varieties in developing economies," EPTD discussion papers 158, International Food Policy Research Institute (IFPRI). [Downloadable!]
  15. Linacre, Nicholas & Falck-Zepeda, José & Komen, John & MacLaren, Donald, 2006. "Risk assessment and management of genetically modified organisms under Australia's Gene Technology Act:," EPTD discussion papers 157, International Food Policy Research Institute (IFPRI). [Downloadable!]
  16. Musisi, A.A., 2006. "Physical public infrastructure and private sector output/productivity in Uganda: a firm level analysis," Working Papers - General Series 424, Institute of Social Studies. [Downloadable!]
  17. Horna, J. Daniela & Smale, Melinda & von Oppen, Matthias, 2005. "Farmer willingness to pay for seed-related information: rice varieties in Nigeria and Benin," EPTD discussion papers 142, International Food Policy Research Institute (IFPRI). [Downloadable!]
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