The Structural and Productivity Effects of Infrastructure Provision in Developed and Developing Countries

In this paper, we provide an empirical assessment of the effects of infrastructure provision on structural change and aggregate productivity using industry-level data for a set of developed and developing countries over 1995-2010. A distinctive feature of our empirical strategy is that it allows the measurement of the resource reallocation directly attributable to infrastructure provision. To achieve this, we propose a two-level top-down decomposition of aggregate productivity that combines and extends several strands of the literature. In our empirical application, we find significant production losses attributable to misallocation of inputs across firms, especially among African countries. Our empirical application also shows that infrastructure provision has stimulated aggregate TFP growth through both within and between-industry productivity gains.