Electricity, Highways and Manufacturing Growth: A Cost Based Estimate

Abstract

This paper studies the rqle of electricity and highways on the Mexican manufacturing sector. The paper uses a weighted aggregate in put of labor and capital (with weights equal to their share in costs) and a weighted measure of infrastructure to estimate jointly the elasticity of infrastructure and the degree of internal returns to scale. 1 pool two digit industries to obtain the estimates for the whole manufacturing sec tor. This paper follows the first order tradition initiated by Solow (1957) and Hall (1988a, b). For the entire manufacturing sector, 1 find that a weighted average index of both types of infrastructure has a significant effect on manufacturing growth. At the sectoral level the evidence is mixed.infrastructure, returns to scale, external effects