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http://ssrn.com/abstract=926442
 
 

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Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures


Johannes W. Fedderke


University of the Witwatersrand - School of Economics and Business Sciences; University of Cape Town

Zeljko Bogetic


World Bank

August 1, 2006

World Bank Policy Research Working Paper No. 3989

Abstract:     
Empirical explorations of the growth and productivity impacts of infrastructure have been characterized by ambiguous (countervailing signs) results with little robustness. A number of explanations of the contradictory findings have been proposed. These range from the crowd-out of private by public sector investment, non-linearities generating the possibility of infrastructure overprovision, simultaneity between infrastructure provision and growth, and the possibility of multiple (hence indirect) channels of influence between infrastructure and productivity improvements. The authors explore these possibilities using panel data for South Africa over the 1970-2000 period, and a range of 19 infrastructure measures. Using a number of alternative measures of productivity, the prevalence of ambiguous (countervailing signs) results, with little systematic pattern is also shown to hold for their data set in estimations that include the infrastructure measures in simple growth frameworks. The authors demonstrate that controlling for potential endogeneity of infrastructure in estimation robustly eliminates virtually all evidence of ambiguous impacts of infrastructure, due for example to possible overinvestment in infrastructure. Controlling for the possibility of endogeneity in the infrastructure measures renders the impact of infrastructure capital not only positive, but of economically meaningful magnitudes. These findings are invariant between the direct impact of infrastructure on labor productivity, and the indirect impact of infrastructure on total factor productivity.

Number of Pages in PDF File: 48

Keywords: Transport Economics Policy & Planning, Economic Theory & Research, Public Sector Economics & Finance, Economic Growth, Inequality

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Date posted: August 24, 2006  

Suggested Citation

Fedderke, Johannes W. and Bogetic, Zeljko, Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures (August 1, 2006). World Bank Policy Research Working Paper No. 3989. Available at SSRN: http://ssrn.com/abstract=926442

Contact Information

Johannes Fedderke (Contact Author)
University of the Witwatersrand - School of Economics and Business Sciences ( email )
Private Bag 3
WITS 2050
South Africa
+27 11 717-8106 (Phone)
University of Cape Town ( email )
Private Bag
Rondebosch, 7701
South Africa
Zeljko Bogetic
World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
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