The Role of Infrastructure in Mexican Economic Reform

Posted: 29 Oct 2005

See all articles by Andrew Feltenstein

Andrew Feltenstein

Georgia State University - Department of Economics

Jiming Ha

International Monetary Fund (IMF)

Abstract

This article estimates the relationship between the provision of public infrastructure and private output in sixteen sectors in Mexico. The sector-specific cost functions depend on wages, the cost of capital, and the nominal values of the stocks of three types of infrastructure: electricity, transport, and communications. The article concludes that infrastructure in electricity and communications generally reduces the cost of sectoral production, but transportation infrastructure tends to increase costs of sectoral production. It appears that Mexican public expenditure on electricity and communications has enhanced the productivity of private production, but expenditure on transport may actually have had a detrimental effect on private output. In addition, although in general labor and infrastructure are substitutes, in the case of electricity and communications infrastructure, capital and infrastructure are complements. In the case of transport infrastructure these conclusions are reversed.

Keywords: Infrastructure, Mexican economic reform

JEL Classification: H41, O14

Suggested Citation

Feltenstein, Andrew and Ha, Jiming, The Role of Infrastructure in Mexican Economic Reform. World Bank Economic Review, Vol. 9, No. 2, pp. 287-304, 1995, Available at SSRN: https://ssrn.com/abstract=827665

Andrew Feltenstein (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-4130093 (Phone)

Jiming Ha

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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