Infrastructure, resource allocation and productivity growth: a mutually consistent decomposition of inter and intra-industry productivity effects

In this paper we propose a bottom-up approach to trace the channels through which infrastructure investments promote economy-wide productivity improvements using industry level data. A distinctive feature of our empirical strategy is that it allows an examination of the role played by infrastructure provision in stimulating aggregate productivity through both a better allocation of resources in the economy and as a proper productivity driver. To achieve this objective, we propose a simple approach that relies on estimating standard production frontier models. Our empirical illustration shows that the inter-industry effects of some key infrastructures are non-trivial (at least in some countries) and have partially offset the improvements in intra-industry productivity.