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Infrastructure Shortage: A Gap Approach

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Abstract

We propose a method to estimate both whether there is an overall infrastructure shortage and the optimal share of infrastructure in gross fixed capital formation (GFCF). This is based on a two-gap model and linear programming, and is illustrated with the case of Mexico (1950-1985). The results show that Mexico appears to have started with an appropriate share of core infrastructures in GFCF. Then, there would have been an infrastructure shortage up until 1964, and an infrastructure surplus there after. It also shows that the optimal coefficient of infrastructure investment-to-optimal output would have been around 4.5 per cent, and that each unit of infrastructure would have optimally supported over three units of GFCF. A macroeconomic shortage do es not however mean that there would be a shortage everywhere, but it does imply that the economy as a whole would be in a net state of shortage. So our method may at least provide an appropriate context within which more focused analysis may be attempted.

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  • Jose Miguel Albala-Bertrand, 1999. "Infrastructure Shortage: A Gap Approach," Working Papers 404, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp404
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp404.pdf
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    References listed on IDEAS

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    1. Evans, Paul & Karras, Georgios, 1994. "Is government capital productive? Evidence from a panel of seven countries," Journal of Macroeconomics, Elsevier, vol. 16(2), pages 271-279.
    2. Edmar Bacha, 1989. "A three gap model of foreign transfers and GPD growth rate in developing countries," Textos para discussão 221, Department of Economics PUC-Rio (Brazil).
    3. Edmar Bacha, 1982. "Growth with limited supplies of foreign exchanges: a reappraisal of the two-gap model," Textos para discussão 26, Department of Economics PUC-Rio (Brazil).
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    Cited by:

    1. 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.
    2. Jose Miguel Albala-Bertrand, 2001. "A Benchmark Estimate for the Capital Stock. An Optimal Consistency Method," Working Papers 434, Queen Mary University of London, School of Economics and Finance.

    More about this item

    Keywords

    Infrastructure shortage; Two-gap model; Linear programming; Mexico;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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