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Infrastructure's contribution to aggregate output

By David Canning

Abstract

Using panel data for a cross-section of countries, the author estimates an aggregate production function that includes infrastructure capital. He finds that: 1) The productivity of physical and human capital is close to the levels suggested by microeconomic evidence on their private returns. 2) Electricity generating capacity and transportation networks have roughly the same marginal productivity as capital as a whole. 3) Telephone networks appear to show higher marginal productivity than other types of capital. Panel data co-integration methods used in estimation take account of the non-stationary nature of the data, are robust to reverse causation, and allow for different levels of productivity and different short-run business-cycle and multiplier relationships across countries.Economic Theory&Research,Banks&Banking Reform,Decentralization,Capital Markets and Capital Flows,Fiscal&Monetary Policy,Economic Theory&Research,Banks&Banking Reform,Economic Growth,Environmental Economics&Policies,Inequality

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