IMPACT OF INFRASTRUCTURE SPENDING IN SUB-SAHARAN AFRICA: A CGE MODELING APPROACH

Antonio Estache, Jean-Francois Perrault and Luc Savard ()
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Luc Savard: GREDI, Faculte d'administration, Université de Sherbrooke

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

Abstract: In this paper we construct an archetype CGE model and apply it to six sub-Saharan African countries to explore the impact of scaling up infrastructure in African countries. As part of the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analysts have raised concerns on providing massive financing for the construction of these infrastructures as the process can create major distortion in the economies and have a negative impact by creating Dutch disease symptoms (Adam and Bevan 2006). This study aims to provide some insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that increase in infrastructure investment does produce slight Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed and type of financing scheme used. Moreover, the growth effects we introduced contribute to attenuate the negative effects.

Keywords: Investment externalities; foreign aid; exchange rate; fiscal reforms (search for similar items in EconPapers)
JEL-codes: C68 D63 E62 F35 H54 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008
New Economics Papers: this item is included in nep-afr, nep-cmp, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0803.pdf First version, 2008 (application/pdf)

Related works:
Working Paper: The impact of infrastructure spending in Sub-Saharan Africa: a CGE modeling approach (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:08-03

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