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Public infrastructure and private sector profitability and productivity in Mexico

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Author Info
Shah, Anwar

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

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References listed on IDEAS
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. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  3. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December. [Downloadable!] (restricted)
  4. Poterba, James M & Rotemberg, Julio J & Summers, Lawrence H, 1986. "A Tax-Based Test for Nominal Rigidities," American Economic Review, American Economic Association, vol. 76(4), pages 659-75, September. [Downloadable!] (restricted)
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  5. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank. [Downloadable!]
  6. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-88, May. [Downloadable!] (restricted)
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  7. 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. [Downloadable!] (restricted)
  8. Balassa, Bela, 1988. "The interaction of factor and product market distortions in developing countries," World Development, Elsevier, vol. 16(4), pages 449-463, April. [Downloadable!] (restricted)
  9. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  10. Holly, Alberto, 1982. "A Remark on Hausman's Specification Test," Econometrica, Econometric Society, vol. 50(3), pages 749-59, May. [Downloadable!] (restricted)
  11. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
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Cited by:
(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. Baffes, John & Shah, Anwar, 1993. "Productivity of public spending, sectoral allocation choices, and economic growth," Policy Research Working Paper Series 1178, The World Bank. [Downloadable!]
    Other versions:
  2. 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.). [Downloadable!]
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