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Impact of Infrastructure Spending in Mali: A CGE modeling approach

  • Antonio Estache

    ()

    (World Bank and, the European Centre for Advanced Research in Economics and Statistics at the Free University of Brussels)

  • Jean-François Perrault

    ()

    (GREDI, Faculte d'administration, Université de Sherbrooke)

  • Luc Savard

    ()

    (GREDI, Faculte d'administration, Université de Sherbrooke)

In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in Mali. 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.

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File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0724.pdf
File Function: First version, 2007
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Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 07-24.

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Length: 28 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:shr:wpaper:07-24
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  1. 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.
  2. Jim Davies, 2003. "Empirical Evidence on Human Capital Externalities," University of Western Ontario, Economic Policy Research Institute Working Papers 20035, University of Western Ontario, Economic Policy Research Institute.
  3. 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.
  4. 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.
  5. 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.
  6. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  7. Fougere, Maxime & Merette, Marcel, 1999. "Population ageing and economic growth in seven OECD countries," Economic Modelling, Elsevier, vol. 16(3), pages 411-427, August.
  8. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  9. Christopher Adam & David Bevan, 2004. "Aid and the Supply Side: Public Investment, Export Performance and Dutch Disease in Low Income Countries," Economics Series Working Papers 201, University of Oxford, Department of Economics.
  10. 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.
  11. 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.
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