Title: The structural and productivity effects of infrastructure provision in developed and developing countries
Authors: Luis Orea - Univ. Autonoma de Madrid y Universidad de Oviedo (Spain) [presenting]
Inmaculada Alvarez - Universidad Autonoma de Madrid (Spain)
Luis Serven - Centro Estudios Monetarios y Financieros (Spain)
Abstract: Evidence as to the effects of infrastructure provision on structural change and economy-wide productivity is provided using industry-level data for a set of developed and developing countries over the 1995-2010 period. A distinctive feature of our empirical strategy is that it allows the measurement of intra and inter-industry resource reallocations which are directly attributable to the infrastructure provision. In order to achieve the above objective, we propose a two-level top-down decomposition of aggregate total factor productivity (TFP). While the theoretical decomposition allows measuring inter-industry reallocation effects, our frontier specification permits measuring inter-firm reallocation effects. The production models are estimated considering the endogeneity of capital and labor, infrastructure, and institutional quality. We find a remarkable and positive within-industry productivity change in Europe, but quite small in Latin America and Africa. The productivity growth attributable to reallocation of inputs across industries has improved overall productivity in most countries, especially in Africa. While this better allocation is mainly caused by unexplained factors, communications infrastructure has attenuated this better allocation of resources.