HOW PRODUCTIVE IS INFRASTRUCTURE? NEW APPROACH AND EVIDENCE FROM RURAL INDIA

Xiaobo Zhang and Shenggen Fan

No 16050, EPTD Discussion Papers from CGIAR, International Food Policy Research Institute (IFPRI)

Abstract: There have been competing arguments about the effect of public infrastructure on productivity in the literature. Level-based regressions generally show a much higher return to public capital than private capital, while difference-based regressions tend to find insignificant or even negative effects. To help reconcile this debate, this paper proposes that researchers should first test for causality in their data to check for length of lagged relationships and the existence of reverse causality, as a critical step before specifying a final model and estimating procedure on the relationship between the stock of capital and productivity growth. A newly developed system GMM method of estimation is proposed for this purpose. Second, a new method of estimating the relationship between the capital stock and productivity in level form is proposed that controls for possible endogeneity problems arising from reverse causation. These methods are illustrated using a unique set of pooled time-series, cross-section data for India. It is shown that infrastructure development in India is productive with an estimated impact lying between those obtained from level-based and difference-based estimates.

Keywords: Public; Economics (search for similar items in EconPapers)
Pages: 17
Date: 2001
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/16050/files/ep010084.pdf (application/pdf)

Related works:
Journal Article: How Productive Is Infrastructure? A New Approach and Evidence from Rural India (2004)
Working Paper: How productive is infrastructure? new approach and evidence from rural India (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:eptddp:16050

DOI: 10.22004/ag.econ.16050

Access Statistics for this paper

More papers in EPTD Discussion Papers from CGIAR, International Food Policy Research Institute (IFPRI) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().