Antonio Estache () (World Bank and, the European Centre for Advanced Research in Economics and Statistics at the Free University of Brussels) Jean-François Perrault () (GREDI, Faculte d'administration, Université de Sherbrooke) Luc Savard () (GREDI, Faculte d'administration, Université de Sherbrooke)
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In this paper we construct an archetype CGE model and apply it to six sub-Saharan African countries to explore the impact of scaling up infrastructure in African countries. As part of the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analysts have raised concerns on providing massive financing for the construction of these infrastructures as the process can create major distortion in the economies and have a negative impact by creating Dutch disease symptoms (Adam and Bevan 2006). This study aims to provide some insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that increase in infrastructure investment does produce slight Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed and type of financing scheme used. Moreover, the growth effects we introduced contribute to attenuate the negative effects.
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Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number
08-03.
Find related papers by JEL classification: C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy F35 - International Economics - - International Finance - - - Foreign Aid H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
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