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Public infrastructure and private sector profitability and productivity in Mexico

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  • Shah, Anwar

Abstract

This paper specifies a microeconomic model to estimate the impact of investment in public infrastructure on private industrial profitability. Empirical results based on time series data for 34 industries characterize the Mexican industrial structure as having involuntary unemployment, deficient product demand, declining productivity growth, increasing returns to scale, and short run excess capital capacity. Aggregate technological change over the period studied has been capital using and labor saving.Both labor and capital are underused in the short run. This disequilibrium has high efficiency costs that may be undermining Mexico's international competitiveness. Therefore, new capital investment in the public sector is not recommended at this time and should be undertaken only to rectify any identified constraints imposed by the inadequacy of infrastructure in the private employment of private factors.

Suggested Citation

  • Shah, Anwar, 1988. "Public infrastructure and private sector profitability and productivity in Mexico," Policy Research Working Paper Series 100, The World Bank.
    • Handle: RePEc:wbk:wbrwps:100
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    References listed on IDEAS

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    Cited by:

    1. William F. Fox & Sanela Porca, 2001. "Investing in Rural Infrastructure," International Regional Science Review, , vol. 24(1), pages 103-133, January.
    2. Faguet, Jean-Paul & Shami, Mahvish, 2008. "Fiscal policy and spatial inequality in Latin America and beyond," LSE Research Online Documents on Economics 27162, London School of Economics and Political Science, LSE Library.
    3. Nader Nazmi & Miguel D. Ramirez, 1997. "Public And Private Investment And Economic Growth In Mexico," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 65-75, January.
    4. Mr. Philip R. Gerson, 1998. "The Impact of Fiscal Policy Variables on Output Growth," IMF Working Papers 1998/001, International Monetary Fund.
    5. Baffes, John & Shah, Anwar, 1998. "Productivity of Public Spending, Sectoral Allocation Choices, and Economic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 46(2), pages 291-303, January.
    6. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
    7. Catherine L. Mann, 1990. "Towards the next generation of newly industrializing economies: the roles for macroeconomic policy and the manufacturing sector," International Finance Discussion Papers 376, Board of Governors of the Federal Reserve System (U.S.).

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