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Public Infrastructure and Economic Growth in Mexico

  • Antonio Noriega
  • Matias Fontenla

We develop a model where investment in infrastructure complements private investment. We then provide time series evidence for Mexico on both the impact of public infrastructure on output, and on the optimality with which levels of infrastructure have been set. In particular, we look at the long-run effects of shocks to infrastructure on real output. We compute Long-Run Derivatives for kilowatts of electricity, roads and phone lines, and find that shocks to infrastructure have positive and significant effects on real output for all three measures of infrastructure. For electricity and roads, the effect becomes significant after 7 and 8 years, respectively, whereas for phones, the effect on growth is significant only after 13 years. These effects of infrastructure on output are in agreement with growth models where long-run growth is driven by endogenous factors of production. However, our results indicate that none of these variables seem to be set at growth maximizing levels.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_058.

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Length: 13 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_058
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  1. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  2. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
  3. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  4. Dickey, David A & Pantula, Sastry G, 1987. "Determining the Ordering of Differencing in Autoregressive Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 455-61, October.
  5. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  6. Pantula, Sastry G., 1989. "Testing for Unit Roots in Time Series Data," Econometric Theory, Cambridge University Press, vol. 5(02), pages 256-271, August.
  7. Perron, Pierre & Ng, Serena, 1996. "Useful Modifications to Some Unit Root Tests with Dependent Errors and Their Local Asymptotic Properties," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 435-63, July.
  8. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  9. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
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