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An Analysis of the Optimal Provision of Public Infrastructure: A Computational Model Using Mexican Data

Author

Listed:
  • Mr. Andrew Feltenstein
  • Mr. Jiming Ha

Abstract

An intertemporal general equilibrium model is used to examine infrastructure effects on the Mexican national income. Production functions are estimated for the major sectors of the economy in which sectoral output depends on inputs of capital and labor, as well as the stocks of the public infrastructure. The analysis indicates that despite high estimated output elasticities with respect to public infrastructure, increased expenditure on infrastructure has rapidly decreasing benefits. Some benefits could be achieved by modest increases in capital expenditures, although at the cost of significantly higher inflation and real interest rates. The increase in real interest rates causes these benefits to be greatly reduced.

Suggested Citation

  • Mr. Andrew Feltenstein & Mr. Jiming Ha, 1996. "An Analysis of the Optimal Provision of Public Infrastructure: A Computational Model Using Mexican Data," IMF Working Papers 1996/013, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/013
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    Cited by:

    1. Torres Preciado, Víctor Hugo & Polanco Gaytán, Mayrén & Manzanares Rivera, José Luis, 2010. "Diferencias en el ingreso per cápita regional e infraestructura de transporte en México [Differences in per capita regional income and transport infrastructure in Mexico]," MPRA Paper 28081, University Library of Munich, Germany.
    2. Joan Costa-Font & Eduardo Rodríguez-Oreggia, 2006. "Path Dependency and the Allocation of Public Investment in Mexico," Environment and Planning C, , vol. 24(2), pages 297-311, April.
    3. Jean-Christophe Dumont & Sandrine Mesplé-Somps, 2000. "L'impact des infrastructures publiques sur la compétitivité et la croissance : une analyse en EGC appliquée au Sénégal," Working Papers DT/2000/08, DIAL (Développement, Institutions et Mondialisation).
    4. repec:dau:papers:123456789/4928 is not listed on IDEAS
    5. Beckman, Jayson & Hertel, Thomas, 2009. "Why Previous Estimates of the Cost of Climate Mitigation Might Be Too Low," Conference papers 331860, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Devarajan, Shantayanan & Robinson, Sherman, 2013. "Contribution of Computable General Equilibrium Modeling to Policy Formulation in Developing Countries," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 277-301, Elsevier.
    7. Emmanuel C. Mamatzakis, 2007. "An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry," CESifo Working Paper Series 2099, CESifo.
    8. Satya Paul & Balbir S. Sahni & Bagala P. Biswal, 2004. "Public Infrastructure and the Productive Performance of Canadian Manufacturing Industries," Southern Economic Journal, John Wiley & Sons, vol. 70(4), pages 998-1011, April.
    9. Rodriguez-Oreggia, Eduardo & Rodriguez-Pose, Andres, 2004. "The Regional Returns of Public Investment Policies in Mexico," World Development, Elsevier, vol. 32(9), pages 1545-1562, September.
    10. Anwar, Sajid, 2006. "Provision of public infrastructure, foreign investment and welfare in the presence of specialisation-based external economies," Economic Modelling, Elsevier, vol. 23(1), pages 142-156, January.
    11. Pawel Gasiorowski & Marian Moszoro, 2008. "Optimal Capital Structure of Public-Private Joint Ventures," IMF Working Papers 2008/001, International Monetary Fund.
    12. Walter Buhr, 2003. "What is infrastructure?," Volkswirtschaftliche Diskussionsbeiträge 107-03, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    13. Anu Tokila & Mika Haapanen, 2012. "Evaluation of Deadweight Spending in Regional Enterprise Financing," Regional Studies, Taylor & Francis Journals, vol. 46(2), pages 185-201, May.
    14. Mamatzakis, E. & Tsionas, M., 2018. "Revisiting the returns of public infrastructure in Mexico: A limited information local likelihood estimation," Economic Modelling, Elsevier, vol. 75(C), pages 132-141.

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