An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry
33 Pages Posted: 2 Oct 2007
Date Written: September 2007
It has been frequently quoted in the literature that one decisive cause of the productive performance of an economy might be infrastructure investment. This paper provides a dual profit theoretical framework of measuring the effects of infrastructure on economic performance in terms of gains in profits, cost savings, as well as in terms of productivity growth enhancement. In an empirical application, we opt for Mexican industry data. The results show that returns to infrastructure capital are significant and positive, though some variability across time exists. Moreover, the decomposition of total factor productivity growth reveals that the economic performance could be enhanced by investing in infrastructure capital.
Keywords: profit function, productivity growth, public infrastructure, Mexican manufacturing
JEL Classification: D21, D24, H54, E62
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