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Is infrastructure capital productive ? a dynamic heterogeneous approach, Volume 1
 
Author:Calderon, Cesar; Moral-Benito, Enrique; Serven, Luis; Country:World;
Date Stored:2011/06/15Document Date:2011/06/01
Document Type:Policy Research Working PaperSubTopics:Transport Economics Policy & Planning; Economic Theory & Research; Banks & Banking Reform; Infrastructure Economics; Public Sector Economics
Language:EnglishMajor Sector:Public Administration, Law, and Justice
Rel. Proj ID:1W-Reforms And Growth -- -- P080834;Region:The World Region
Report Number:WPS5682Sub Sectors:Central government administration
Collection Title:Policy Research working paper ; no. WPS 5682Paper is funded by the Knowledge for Change Program (KCP)TF No/Name:TF098053-KCPII - Industrial Policy in an Uncertain Environment; TF099120-KCP; TF099853-PHRD STAFF GRANT SUPPORT FOR TOMOKO WADA
Volume No:1  

Summary: This paper offers an empirical evaluation of the output contribution of infrastructure. Drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960-2000, and using a panel time-series approach, the paper estimates a long-run aggregate production function relating GDP to human capital, physical capital, and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport, power, and telecommunications. Tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector, which is taken to represent the long-run production function. Estimation of its parameters is performed using the pooled mean group estimator, which allows for unrestricted short-run parameter heterogeneity across countries while imposing the (testable) restriction of long-run parameter homogeneity. The long-run elasticity of output with respect to the synthetic infrastructure index ranges between 0.07 and 0.10. The estimates are highly significant, both statistically and economically, and robust to alternative dynamic specifications and infrastructure measures. There is little evidence of long-run parameter heterogeneity across countries, whether heterogeneity is unconditional, or conditional on their level of development, population size, or infrastructure endowments.

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