Infrastructure Shortage: A Gap Approach

J.M. Albala-Bertrand

No 404, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We propose a method to estimate both whether there is an overall infrastructure shortage and the optimal share of infrastructure in gross fixed capital formation (GFCF). This is based on a two-gap model and linear programming, and is illustrated with the case of Mexico (1950-1985). The results show that Mexico appears to have started with an appropriate share of core infrastructures in GFCF. Then, there would have been an infrastructure shortage up until 1964, and an infrastructure surplus there after. It also shows that the optimal coefficient of infrastructure investment-to-optimal output would have been around 4.5 per cent, and that each unit of infrastructure would have optimally supported over three units of GFCF. A macroeconomic shortage do es not however mean that there would be a shortage everywhere, but it does imply that the economy as a whole would be in a net state of shortage. So our method may at least provide an appropriate context within which more focused analysis may be attempted.

Keywords: Infrastructure shortage; Two-gap model; Linear programming; Mexico (search for similar items in EconPapers)
JEL-codes: C61 E12 O11 O41 O54 (search for similar items in EconPapers)
Date: 1999-05-01
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:404

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