Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures

Empirical explorations of the growth and productivity impacts of infrastructure have been characterized by ambiguous (countervailing signs) results with little robustness. A number of explanations of the contradictory findings have been proposed. These range from the crowd-out of private by public s...

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Bibliographic Details
Main Authors:	Fedderke, Johannes W., Bogetić, Željko
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING AGGREGATE PRODUCTION FUNCTION AIR AIR TRAVEL AIRPORTS AIRWAYS ANNUAL GROWTH AVERAGE GROWTH AVERAGE GROWTH RATE BENCHMARK CAPITAL ACCUMULATION CAPITAL STOCK COMPETITIVENESS CONGESTION CONSTANT RATE CONSTANT RETURNS CONSTANT RETURNS TO SCALE DATA QUALITY DATA SET DATA SETS DEPENDENT VARIABLE DEVELOPING COUNTRIES DIESEL DIFFERENTIAL IMPACT DIMINISHING RETURNS DIMINISHING RETURNS TO SCALE DRIVERS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC THEORY ELASTICITIES ELASTICITY ELASTICITY OF SUBSTITUTION ELECTRICITY EMPIRICAL EVIDENCE EMPIRICAL FINDINGS EMPIRICAL LITERATURE EMPIRICAL MODEL EMPIRICAL RESULTS EMPIRICAL SECTION EMPIRICAL STUDIES EMPIRICAL SUPPORT EMPIRICAL WORK ENDOGENOUS GROWTH ENDOGENOUS GROWTH MODEL EQUILIBRIUM VALUES EXOGENOUS TECHNOLOGICAL PROGRESS EXPORTS FINANCIAL LIBERALIZATION FOREIGN DIRECT INVESTMENT GDP GOODS VEHICLES GOVERNMENT EXPENDITURE GROSS FIXED CAPITAL FORMATION GROWTH ACCOUNTING GROWTH EQUATION GROWTH IMPACT GROWTH MODEL GROWTH MODELS GROWTH PERFORMANCE GROWTH RATE GROWTH RATES GROWTH THEORY HOUSEHOLD INCOME HUMAN CAPITAL INCOME INCOME GROUPS INCOME SHARE INCOME TAX INCREASING RETURNS INEFFICIENCY INFRASTRUCTURE CAPITAL INFRASTRUCTURE INVESTMENT INFRASTRUCTURE PROVISION JOURNEYS LABOR FORCE LABOR PRODUCTIVITY LATIN AMERICAN LEVEL OF TECHNOLOGY LONG-RUN EQUILIBRIUM LONG-TERM GROWTH MARGINAL PRODUCT MARGINAL PRODUCTS MARGINAL UTILITY MAXIMUM LIKELIHOOD ESTIMATION MEASUREMENT ERROR NEGATIVE COEFFICIENT NEGATIVE IMPACT NEGATIVE SIGN NET EFFECT NET EXPORTS OVERVALUATION PASSENGER VEHICLES PASSENGERS PATENTS PETROLEUM PRODUCTS POLICY INTERVENTION POLICY RESEARCH POOR GROWTH POSITIVE EFFECT POSITIVE IMPACT PRIVATE SECTOR PRODUCT MARKET PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTIVITY PROPERTY RIGHTS PROVISION OF INFRASTRUCTURE PUBLIC PUBLIC CAPITAL PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC SECTOR PUBLIC SECTOR INVESTMENT QUALITY GROWTH RAIL RAIL TRAFFIC RAIL TRANSPORT RAILWAY RAILWAY LINE RAILWAY LINES RAILWAYS ROAD ROAD TRAFFIC ROADS ROLLING STOCK ROUTE SANITATION SCALE EFFECTS SHORT-RUN DYNAMICS SIGNIFICANT IMPACT SUB-SAHARAN AFRICA TECHNICAL EFFICIENCY TECHNOLOGICAL CHANGE TELECOMMUNICATIONS TFP TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRANSPORT TRANSPORT COSTS TRANSPORT EQUIPMENT TRUE URBANIZATION VALUE ADDED
Online Access:	http://documents.worldbank.org/curated/en/2006/08/6988207/infrastructure-growth-south-africa-direct-indirect-productivity-impacts-19-infrastructure-measures http://hdl.handle.net/10986/9290

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Summary:	Empirical explorations of the growth and productivity impacts of infrastructure have been characterized by ambiguous (countervailing signs) results with little robustness. A number of explanations of the contradictory findings have been proposed. These range from the crowd-out of private by public sector investment, non-linearities generating the possibility of infrastructure overprovision, simultaneity between infrastructure provision and growth, and the possibility of multiple (hence indirect) channels of influence between infrastructure and productivity improvements. The authors explore these possibilities using panel data for South Africa over the 1970-2000 period, and a range of 19 infrastructure measures. Using a number of alternative measures of productivity, the prevalence of ambiguous (countervailing signs) results, with little systematic pattern is also shown to hold for their data set in estimations that include the infrastructure measures in simple growth frameworks. The authors demonstrate that controlling for potential endogeneity of infrastructure in estimation robustly eliminates virtually all evidence of ambiguous impacts of infrastructure, due for example to possible overinvestment in infrastructure. Controlling for the possibility of endogeneity in the infrastructure measures renders the impact of infrastructure capital not only positive, but of economically meaningful magnitudes. These findings are invariant between the direct impact of infrastructure on labor productivity, and the indirect impact of infrastructure on total factor productivity.

Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures

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