Quantitative analysis of the effects of public infrastructure investment on cost structure and economic performance: evidence from 29 china’s manufacturing industries

Chen Yu and Qin Yin

Applied Economics Letters, 2024, vol. 31, issue 16, 1546-1553

Abstract: China’s manufacturing sector has fallen into recession since 2010 and one key bottleneck is the increase in operating cost of enterprises. To step out of the predicament, it is critical to reduce cost. By collecting data of 29 manufacturing industries in China during 1980–2020, this paper jointly measures translog cost function and factor input share function and detects the effects of infrastructure investment on cost structure and performance of China’s manufacturing industries. It finds infrastructure investment reduces enterprises’ operating cost and their demand on labour force. The rate of return to infrastructure is greater than that to private capital, indicating that insufficient supply of infrastructure holds back the development of manufacturing industries. Therefore, it is highly advocated that Chinese government should increase investment in infrastructure construction.

Date: 2024
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DOI: 10.1080/13504851.2023.2203446

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