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Scaling up infrastructure spending in the Philippines: A CGE top-down bottom-up microsimulation approach

  • Luc Savard

    ()

    (GREDI, Faculté d'administration, Université de Sherbrooke, 2500 Bld de l'Université, Sherbrooke, Québec, Canada, J1K 2R1)

In this paper we use a top-down bottom-up CGE microsimulation model with endogenous labour supply and unemployment to explore the impact of scaling up infrastructure spending in the Philippines. In the current debate on the importance of scaling up infrastructure to stimulate growth, some analysts raise concerns about potential negative macroeconomic impacts (Dutch disease). This study aims to provide some insight into this debate by extending the analysis to include distributional analysis. We draw from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and from Fay and Yepes (2003) to include operating and maintenance costs associated with new infrastructure. We investigate two fiscal tools and foreign aid as mechanisms to fund the new infrastructure and associated costs. The distributional analysis is performed with FGT indices and growth incidence curves. Our results reveal that infrastructure spending reduces poverty. Foreign aid is shown to be the most equitable funding mechanism, whereas a value added tax provides the strongest poverty reduction.

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File URL: http://ima.natsem.canberra.edu.au/IJM/V3_1/IJM_28.pdf
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Article provided by International Microsimulation Association in its journal International Journal of Microsimulation.

Volume (Year): 3 (2010)
Issue (Month): 1 ()
Pages: 43-59

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Handle: RePEc:ijm:journl:v:3:y:2010:i:1:p:43-59
Contact details of provider: Web page: http://www.microsimulation.org/ijm/

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