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Impact of Infrastructure Spending in Mali: A CGE Modeling Approach


  • Antonio Estache
  • Jean-François Perrault
  • Luc Savard


In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in an African country. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analyst raise concern on financing these infrastructures after construction and that external funding of these can create major distortion and have a negative impact on the trade balance of these countries. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that foreign aid does produce Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed. Moreover, growth effects contribute to attenuate the negative effects.

Suggested Citation

  • Antonio Estache & Jean-François Perrault & Luc Savard, 2009. "Impact of Infrastructure Spending in Mali: A CGE Modeling Approach," Working Papers ECARES 2009_009, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2009_009

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    References listed on IDEAS

    1. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
    2. Christopher S. Adam & David L. Bevan, 2006. "Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries," World Bank Economic Review, World Bank Group, vol. 20(2), pages 261-290.
    3. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
    4. Jung, Hong-Sang & Thorbecke, Erik, 2003. "The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 701-725, November.
    5. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
    6. Terry McKinley, 2005. "Why is ?The Dutch disease? always a disease? the macroeconomic consequences of scaling up ODA," Working Papers 10, International Policy Centre for Inclusive Growth.
    7. Anderson, James E. & Martin, Will, 1998. "Evaluating public expenditures when governments must rely on distortionary taxation," Policy Research Working Paper Series 1981, The World Bank.
    8. Bajo-Rubio, Oscar & Sosvilla-Rivero, Simon, 1993. "Does public capital affect private sector performance? : An analysis of the Spanish case, 1964-1988," Economic Modelling, Elsevier, vol. 10(3), pages 179-185, July.
    9. Fougere, Maxime & Merette, Marcel, 1999. "Population ageing and economic growth in seven OECD countries," Economic Modelling, Elsevier, vol. 16(3), pages 411-427, August.
    10. Jim Davies, "undated". "Empirical Evidence on Human Capital Externalities," Working Papers-Department of Finance Canada 2003-11, Department of Finance Canada.
    11. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
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    Cited by:

    1. Harald SCHMIDBAUER & Ece DEMIREL, "undated". "Monetary Authorities and Exchange Rate Volatility: Turkey and other Cases," EcoMod2010 259600150, EcoMod.
    2. Boureima Sawadogo & Tegawende Juliette Nana & Maimouna Hama Natama & Fidèle Bama & Emma Tapsoba & Kassoum Zerbo, 2015. "Impact de l'expansion économique et commerciale de la Chine sur la croissance et l'emploi au Burkina Faso: une analyse en équilibre général calculable," Working Papers MPIA 2015-03, PEP-MPIA.

    More about this item


    Investment externalities; foreign aid; exchange rate; fiscal reforms;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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