Is infrastructure capital productive ? a dynamic heterogeneous approach
AbstractThis paper offers an empirical evaluation of the output contribution of infrastructure. Drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960-2000, and using a panel time-series approach, the paper estimates a long-run aggregate production function relating GDP to human capital, physical capital, and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport, power, and telecommunications. Tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector, which is taken to represent the long-run production function. Estimation of its parameters is performed using the pooled mean group estimator, which allows for unrestricted short-run parameter heterogeneity across countries while imposing the (testable) restriction of long-run parameter homogeneity. The long-run elasticity of output with respect to the synthetic infrastructure index ranges between 0.07 and 0.10. The estimates are highly significant, both statistically and economically, and robust to alternative dynamic specifications and infrastructure measures. There is little evidence of long-run parameter heterogeneity across countries, whether heterogeneity is unconditional, or conditional on their level of development, population size, or infrastructure endowments.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5682.
Date of creation: 01 Jun 2011
Date of revision:
Transport Economics Policy&Planning; Economic Theory&Research; Banks&Banking Reform; Public Sector Economics; Infrastructure Economics;
Other versions of this item:
- César Calderón & Enrique Moral-Benito & Luis Servén, 2011. "Is infrastructure capital productive? A dynamic heterogeneous approach," Banco de Espaï¿½a Working Papers 1103, Banco de Espa�a.
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
- NEP-DEV-2011-07-02 (Development)
- NEP-EFF-2011-07-02 (Efficiency & Productivity)
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