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Infrastructure in CGE models: Alternative formulations, empirical evidence, and a new approach

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  • Lofgren, Hans
  • Cicowiez, Martin

Abstract

The econometric literature shows that, when complementary conditions have been satisfied, investments in physical infrastructure have made a major contribution to economic progress. Drawing on these findings and the endogenous growth literature, computable general equilibrium (CGE) models have been designed to simulate the impact of infrastructure investments. Against this background, this paper (a) reviews econometric analysis of the impact of infrastructure on economic growth and the infrastructure-related CGE literature: formulations used, values and sources of key parameters, and simulation results; and (b) drawing on (a), tests a new formulation based on the marginal productivity of infrastructure capital. The new approach is flexible, data-driven and has limited core-data requirements but can be extended to cover additional features (like investment efficiency, capital quality, and operations and maintenance (O&M) costs when additional information is available.

Suggested Citation

  • Lofgren, Hans & Cicowiez, Martin, 2021. "Infrastructure in CGE models: Alternative formulations, empirical evidence, and a new approach," Conference papers 333280, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333280
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    References listed on IDEAS

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