Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach

34 Pages Posted: 5 Apr 2011

See all articles by César Calderón

César Calderón

World Bank

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Luis Servén

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: March 29, 2011

Abstract

This paper offers an evaluation of the output contribution of infrastructure. Drawing from a large data set of 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 we interpret as the long-run production function. Estimation of its parameters is performed using the pooled mean group (PMG) 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.

Keywords: Infrastructure, panel cointegration, parameter heterogeneity

JEL Classification: H54, E23, O40

Suggested Citation

Calderon, Cesar A. and Moral-Benito, Enrique and Servén, Luis, Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach (March 29, 2011). Banco de Espana Working Paper No. 1103. Available at SSRN: https://ssrn.com/abstract=1798484 or http://dx.doi.org/10.2139/ssrn.1798484

Cesar A. Calderon

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States
202-458-7214 (Phone)
202-522-7528 (Fax)

HOME PAGE: http://www.worldbank.org/laceconomist

Enrique Moral-Benito (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Luis Servén

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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