The productivity effects of infrastructure: A cross-country comparison using manufacturing industry panels

ABSTRACT

Studies on the productivity effects of infrastructure have produced ambiguous results because of potential inter-sectoral dependencies, non-stationarity and endogeneity issues in estimation. Employing estimators that address these problems, we test the effects of a composite infrastructure index on a panel of industries for four major-Asian economies. Our results indicate positive and sizable long-run effects of infrastructure on productivity for India and China, but not for Japan and S. Korea.

KEYWORDS:

• Infrastructure
• productivity
• manufacturing
• Asia

JEL CLASSIFICATION:

• C33
• D24
• L60
• O57

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ This follows from infrastructure-demand estimation literature that identifies per-capita income as a crucial infrastructure input (Fay and Yepes 2003).

² Cross-sectional dependency, non-stationarity and endogeneity are reasons of inconsistencies in the previous results. Employing CPMG effectively overcomes these potential problems (Chudik and Pesaran 2013).