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An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry

  • Emmanuel C. Mamatzakis

It has been frequently quoted in the literature that one decisive cause of the productive performance of an economy might be infrastructure investment. This paper provides a dual profit theoretical framework of measuring the effects of infrastructure on economic performance in terms of gains in profits, cost savings, as well as in terms of productivity growth enhancement. In an empirical application, we opt for Mexican industry data. The results show that returns to infrastructure capital are significant and positive, though some variability across time exists. Moreover, the decomposition of total factor productivity growth reveals that the economic performance could be enhanced by investing in infrastructure capital.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2099.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2099
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  1. Nadiri, M. Ishaq & Mamuneas, Theofanis P., 1991. "The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries," Working Papers 91-57, C.V. Starr Center for Applied Economics, New York University.
  2. Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, 2004. "Latin America in the rearview mirror," Staff Report 351, Federal Reserve Bank of Minneapolis.
  3. Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "State Infrastructure and Productive Performance," American Economic Review, American Economic Association, vol. 86(5), pages 1095-1111, December.
  4. Hofman, André A., 2000. "The economic development of Latin America in the twentieth century," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1650 edited by Eclac.
  5. Wim P. M. Vijverberg & Chu-Ping C. Vijverberg & Janet L. Gamble, 1997. "Public Capital And Private Productivity," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 267-278, May.
  6. Feltenstein, Andrew & Shah, Anwar, 1992. "General equilibrium effects of investment incentives in Mexico," Policy Research Working Paper Series 927, The World Bank.
  7. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  8. Jose Miguel Albala-Bertrand, 2003. "An Economical Approach to Estimate a Benchmark Capital Stock. An Optimal Consistency Method," Working Papers 503, Queen Mary University of London, School of Economics and Finance.
  9. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  10. Shah, Anwar, 1992. "Dynamics of Public Infrastructure, Industrial Productivity and Profitability," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 28-36, February.
  11. Feltenstein, Andrew & Ha, Jiming, 1999. "An analysis of the optimal provision of public infrastructure: a computational model using Mexican data," Journal of Development Economics, Elsevier, vol. 58(1), pages 219-230, February.
  12. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
  13. Soledad Arellano & Matías Braun-Llona, 1999. "Stock de Recursos de la Economía Chilena," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 36(107), pages 639-684.
  14. Feltenstein, Andrew & Ha, Jiming, 1995. "The Role of Infrastructure in Mexican Economic Reform," World Bank Economic Review, World Bank Group, vol. 9(2), pages 287-304, May.
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