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Public infrastructure and private sector profitability and productivity in Mexico

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  • Shah, Anwar

Abstract

This paper specifies a microeconomic model to estimate the impact of investment in public infrastructure on private industrial profitability. Empirical results based on time series data for 34 industries characterize the Mexican industrial structure as having involuntary unemployment, deficient product demand, declining productivity growth, increasing returns to scale, and short run excess capital capacity. Aggregate technological change over the period studied has been capital using and labor saving.Both labor and capital are underused in the short run. This disequilibrium has high efficiency costs that may be undermining Mexico's international competitiveness. Therefore, new capital investment in the public sector is not recommended at this time and should be undertaken only to rectify any identified constraints imposed by the inadequacy of infrastructure in the private employment of private factors.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 100.

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Date of creation: 30 Sep 1988
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Handle: RePEc:wbk:wbrwps:100

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Public Sector Economics&Finance; Inequality;

References

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  1. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
  2. Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-87, May.
  3. Levy, Santiago, 1989. "Export subsidies and the balance of trade," Journal of Development Economics, Elsevier, vol. 31(1), pages 99-121, July.
  4. James M. Poterba & Julio J. Rotemberg & Lawrence H. Summers, 1985. "A Tax-Based Test for Nominal Rigidities," Working papers 376, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  6. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  7. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank.
  8. Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
  9. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  10. Holly, Alberto, 1982. "A Remark on Hausman's Specification Test," Econometrica, Econometric Society, vol. 50(3), pages 749-59, May.
  11. Lindbeck, Assar & Snower, Dennis J, 1988. "Long-term Unemployment and Macroeconomic Policy," American Economic Review, American Economic Association, vol. 78(2), pages 38-43, May.
  12. Boadway, Robin W, 1973. "Similarities and Differences between Public Goods and Public Factors," Public Finance = Finances publiques, , vol. 28(3-4), pages 245-58.
  13. Balassa, Bela, 1988. "The interaction of factor and product market distortions in developing countries," World Development, Elsevier, vol. 16(4), pages 449-463, April.
  14. Mark Schankerman & M. Ishaq Nadiri, 1984. "Restriced Cost Functions and the Rate of Return to Quasi-Fixed Factors, with an Application to R&D and Capital in the Bell System," NBER Working Papers 1259, National Bureau of Economic Research, Inc.
  15. Ernst R. Berndt & Melvyn A. Fuss, 1982. "Productivity Measurement Using Capital Asset Valuation to Adjust for Variations in Utilization," NBER Working Papers 0895, National Bureau of Economic Research, Inc.
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Cited by:
  1. Baffes, John & Shah, Anwar, 1993. "Productivity of public spending, sectoral allocation choices, and economic growth," Policy Research Working Paper Series 1178, The World Bank.
  2. Jean-Paul Faguet & Mahvish Shami, 2008. "Fiscal policy and spatial inequality in Latin America and beyond," LSE Research Online Documents on Economics 27162, London School of Economics and Political Science, LSE Library.
  3. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
  4. Catherine L. Mann, 1990. "Towards the next generation of newly industrializing economies: the roles for macroeconomic policy and the manufacturing sector," International Finance Discussion Papers 376, Board of Governors of the Federal Reserve System (U.S.).

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