Concrete Thinking About Development

Martina Kirchberger and Keelan Beirne ()
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Keelan Beirne: Department of Economics, Princeton University

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper uses new micro-data on key input prices in the construction sector and market structure to understand the reasons for price differences and their implications for capital accumulation. Our key motivating facts are that (i) there is large dispersion in prices of eight key construction sector inputs and that cement prices were particularly high in Sub-Saharan Africa compared to the rest of the world; (ii) using data on the market structure of the cement industry at a global level, cement prices are highest in countries with few firms; (iii) cement plays a significant role in construction sector expenditures, particularly in the poorest countries. Estimates from our model of oligopoly suggest that lower levels of competition lead to significantly higher prices. Financial accounts data point toward substantial pure profits, and there is no evidence from plant size distributions that minimum efficient scale is driving high prices. Finally, embedding the oligopoly model into a neoclassical growth model, we show that distortions in investment producing sectors have a disproportionate impact on productive capacity and that the steady-state capital stock in the poorest countries is most sensitive to changes in markups in cement.

Keywords: construction; infrastructure; capital; cement; investment; markups; general equilibrium (search for similar items in EconPapers)
JEL-codes: E22 H54 L13 L74 O18 O41 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2021-06
New Economics Papers: this item is included in nep-com, nep-dev and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0621

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