Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach

34 Pages Posted: 20 Apr 2016  

César Calderón

World Bank

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Luis Servén

World Bank - Office of the Chief Economist; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2011

Abstract

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.

Keywords: Transport Economics Policy & Planning, Economic Theory & Research, Banks & Banking Reform, Public Sector Economics, Infrastructure Economics

Suggested Citation

Calderón, César and Moral-Benito, Enrique and Servén, Luis, Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach (June 1, 2011). World Bank Policy Research Working Paper No. 5682. Available at SSRN: https://ssrn.com/abstract=1871578

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

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 - Office of the Chief Economist ( email )

Washington, DC 20433
United States
202-473-7451 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/research/bios/lserven.htm

World Bank - Development Research Group (DECRG)

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

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