Infrastructures and Productivity: A Country-Sector Panel Analysis

Paolo Giordani, Alberto Petrucci and Alberto Franco Pozzolo

No 505, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: This paper investigates the impact of physical infrastructures on sectoral total factor productivity (TFP). In the first part, a neoclassical growth model with multiple productive sectors and public capital (in the form of infrastructures) uncovers a long-run relationship between infrastructures and sectoral TFP. In the second part, a panel-cointegration analysis evaluates the long-run impact of 4 distinct types of infrastructures-transport, energy, ICT, health-on the TFPs of 22 manufacturing sectors in a sample of 65 (developed and emerging) countries between 1995 and 2018. We find that infrastructures are a positive and significant determinant of sectoral TFPs. A panel error-correction model also confirms that causality runs from infrastructures to TFPs. These results are robust to further empirical analysis conducted on sub-samples segmented by several dimensions. Our findings can inform policy in designing targeted interventions and prioritizing investment.

Keywords: Public infrastructures; Sectoral productivity; Total factor productivity (TFP); Panel cointegration; Trade-based TFP estimation; Panel error correction (search for similar items in EconPapers)
JEL-codes: C33 E22 H54 O33 O47 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2025-07-16
New Economics Papers: this item is included in nep-eff and nep-ict
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:505

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