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Public infrastructure and structural transformation

Author

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  • Perez Sebastian,Fidel
  • Steinbuks,Jevgenijs

Abstract

This study argues that public infrastructure is an important though previously neglected driving mechanism of the structural transformation process. To assess its significance quantitatively, this study first develops a multisector neoclassical growth model with heterogeneous firms, where public infrastructure contributes to firms'production and mitigates the barriers to firms'entry. The model is calibrated using data from Brazil, a country that has significantly expanded its infrastructure in recent decades, yet remains in deep need of further infrastructure improvements. The accumulation of infrastructure accelerates the structural transformation through generating higher returns and lowering entry costs in sectors with greater public capital intensity. In the simulations, public capital formation explains about 15 percent of the process. The paper also shows the effects of different barriers to public capital formation on the structural transformation and GDP per capita.

Suggested Citation

  • Perez Sebastian,Fidel & Steinbuks,Jevgenijs, 2017. "Public infrastructure and structural transformation," Policy Research Working Paper Series 8285, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8285
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    Citations

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    Cited by:

    1. Monica Martinez-Bravo & Leonard Wantchekon, 2021. "Political Economy and Structural Transformation: Democracy, Regulation and Public Investment," Working Papers wp2021_2110, CEMFI.
    2. Boto-Garcia, David & Leoni, Veronica, 2022. "Estimating the dynamic effects of volcano eruptions on domestic tourism: Evidence based on mobile-phone geo-positioning records," Efficiency Series Papers 2022/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    3. Luis Orea & Inmaculada Álvarez-Ayuso & Luis Servén, 2024. "The Structural and Productivity Effects of Infrastructure Provision in Developed and Developing Countries," Advances in Econometrics, in: Essays in Honor of Subal Kumbhakar, volume 46, pages 265-308, Emerald Group Publishing Limited.
    4. Sievert, Maximiliane & Steinbuks, Jevgenijs, 2020. "Willingness to pay for electricity access in extreme poverty: Evidence from sub-Saharan Africa," World Development, Elsevier, vol. 128(C).
    5. Timilsina,Govinda R. & Hochman,Gal & Song,Ze, 2020. "Infrastructure, Economic Growth, and Poverty : A Review," Policy Research Working Paper Series 9258, The World Bank.

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