- Log In/Sign Up
- P-ISSN2765-6934
- E-ISSN2765-7027
- KCI
ISSN : 2765-6934
Infrastructure-Growth Link and the Threshold Effects of Sub-Indices of Institutions
Sunday Idowu OLADEJI (Obafemi Awolowo University)
Abstract
Purpose: This study extends previous empirical work on the threshold effects of institutions on the relationship between infrastructure and economic growth. It does so by using three sub-indices of institutions as the threshold variable in place of aggregate index. This is with a view to determining the roles of the sub-indices in the nexus between infrastructure and economic growth. Research design, data and methodology: The analysis is based on a dynamic panel threshold regression model using a panel data set comprising 41 countries in Sub-Saharan Africa over the sample period of 1996-2015. Data are obtained from Ogbaro (2019). Results: The study finds that infrastructure exerts significant positive effects on economic growth below and above the threshold values of the three sub-indices, with higher effects above the threshold values. Results also show that on average, the Sub-Saharan African countries are not able to satisfy any of the threshold conditions, which accounts for their poor growth experience. Conclusion: The study concludes that countries with weak institutions do not benefit maximally from infrastructure development policies. The paper, therefore, recommends that countries in SubSaharan Africa need to focus on improving their institutional patterns if they are to reap the optimum benefits from their infrastructure development efforts.
- keywords
- Infrastructure, Institutions and Growth, Threshold Model, Sub-Saharan Africa
Reference
Agénor, P. R., & Montiel, P. J. (2015). Development Macroeconomics (4th ed.). New Jersey: Princeton University Press.
Albala-Bertrand, J. M. (2004). Can the Composition of Capital Constrain Potential Output? A Gap Approach. Retrieved September 15, 2019, from https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/archive/wp510.pdf
Amadeo, K. (2016). It's Good That China's Growth Is Slowing Really. Retrieved February 16, 2020, from www.thebalance.com/china-s-economic-growth-cause-pros-cons-future-3305478
Annala, C. N., Batina, R. G., & Feehan, J. P. (2008). Empirical impact of public infrastructure on the Japanese economy. Japanese Economic Review, 59(4), 419-437.
Anochiwa, L. I., & Maduka, A. (2014). Human Capital, Infrastructure and Economic Growth in Nigeria: An Empirical Evidence. IOSR Journal of Electrical and Electronics Engineering, 9(4), 01-06.
Apanisile, O., & Akinlo, T. (2013). Rail Transport and Economic Growth in Nigeria (1970-2011). Australian Journal of Business and Management Research, 3(5), 18-24.
Aschauer, D. A. (1989). Is public expenditure productive? Journal of Monetary Economics, 23(2), 177-200.
Asongu, S. A., Nwachukwu, J. C., & Orim, S. M. I. (2018). Mobile phones, institutional quality and entrepreneurship in Sub-Saharan Africa. Technological Forecasting and Social Change, 131, 183-203.
Badalyan, G., Herzfeld, T., & Rajcaniova, M. (2015). Infrastructure, institutions, and economic productivity in transition countries. Retrieved December 20, 2019, from http://www.slpk.sk/eldo/2016/dl/9788055215037/files/12/badalyan-et-al.html
Cadot, O., Röller, L. H., & Stephan, A. (2006). Contribution to productivity or pork barrel? The two faces of infrastructure investment. Journal of Public Economics, 90(6), 1133-1153.
Calderón, C., Moral‐Benito, E., & Servén, L. (2015). Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach. Journal of Applied Econometrics, 30(2), 177-198.
Candelon, B., Colletaz, G., & Hurlin, C. (2013). Network Effects and Infrastructure Productivity in Developing Countries. Oxford Bulletin of Economics and Statistics, 75(6), 887-913.
Canning, D., & Pedroni, P. (1999). Infrastructure and Long Run Economic Growth. Retrieved January 2, 2020, from https://pdfs.semanticscholar.org/4990/c511fb4a78a0464ef9b6141d9ab20b688961.pdf
Chatterjee, S. (2005). Poverty reduction strategies-lessons from the Asian and pacific region on inclusive development. Asian Development Review, 22(1), 12-44.
Crescenzi, R., Cataldo, M. D., & Rodríguez-Pose, A. (2016). Government Quality and the Economic Returns of Transport Infrastructure Investment in European Regions. Journal of Regional Science, 56(4), 555-582.
Dabla-Norris, E., Brumby, J., Kyobe, A., Mills, Z., & Papageorgiou, C. (2012). Investing in Public Investment: An Index of Public Investment Efficiency. Journal of Economic Growth, 17(3), 235-266.
Damijan, S. & Padilla, B. (2014). Effectiveness of Infrastructure Project Investments in Africa. Retrieved July 21, 2019, from https://institute.eib.org/wp-content/uploads/2016/04/Effectiveness_of_Infrastructure_Project_Investments_in_Africa_final_vers....pdf
Demir, A. U. (2015). Three essays on the non-linear dynamics of the finance-growth nexus. Retrieved October 10, 2019, from https://pdfs.semanticscholar.org/2adc/280c167b450b6b0e49aac5bc280b2eed7a84.pdf
Deng, T., Shao, S., Yang, L., & Zhang, X. (2014). Has the transport-led economic growth effect reached a peak in China? A panel threshold regression approach. Transportation, 41(3), 567-587.
Devarajan, S., Swaroop, V., & Zou, H. F. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37(2), 313-344.
Ehuitché, B. T. (2016). Basic Infrastructure, Growth and Convergence in WAEMU. In D. Seck (Ed.), Accelerated Economic Growth in West Africa (pp. 197-211), New York: Springer Cham.
Escobal, J. A., & Ponce, C. (2011). Access to public infrastructure, institutional thickness and pro‐poor growth in Rural Peru. Journal of International Development, 23(3), 358-379.
Estache, A., Speciale, B., & Veredas, D. (2005). How much does infrastructure matter to growth in Sub-Saharan Africa? Retrieved April 28, 2020, from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.508.7016&rep=rep1&type=pdf
Ezcurra, R., Gil, C., Pascual, P., & Rapun, M. (2005). Public capital, regional productivity and spatial spillovers. The Annals of Regional Science, 39(3), 471-494.
Farhadi, M. (2015). Transport infrastructure and long-run economic growth in OECD countries. Transportation Research Part A: Policy and Practice, 74, 73-90.
Fatai, O. O., Omolara, Y. J., & Taiwo, A. B. (2016). Infrastructure Finance and Development in Nigeria. AJBMR Nigerian Chapter of Arabian Journal of Business and Management Review, 3(12), 44-54.
Fischer, S. (2004). A Development Strategy for Asian Economies: Korean Perspective. Retrieved December 29, 2019, from https://www.piie.com/fischer/pdf/fischer051504.pdf
Ghafoor, A., & Yorucu, V. (2002). Public expenditure and productivity puzzle: The case of Northern Cyprus. Retrieved February 25, 2020, from http://www.acarindex.com/dosyalar/makale/acarindex-1423910111.pdf
Hall, J. C., Sobel, R. S., & Crowley, G. R. (2010). Institutions, capital, and growth. Southern Economic Journal, 77(2), 385-405.
International Monetary Fund (2014). Is it time for an Infrastructure Push? The macroeconomics effects of public investment. World Economic Outlook, October, Chapter 3 (2014). Retrieved August 17, 2019, from http://www.imf.org/external/pubs/ft/weo/2014/02/pdf/c3.pdf
Kemmerling, A., & Stephan, A. (2002). The contribution of local public infrastructure to private productivity and its political economy: Evidence from a panel of large German cities. Public Choice, 113, 403–424.
Knack, S., & Manning, N. (2000). Towards consensus on governance indicators. Retrieved August 15, 2019, from http://documents.worldbank.org/curated/en/955851468341094147/pdf/347240towards0consensus.pdf
Kodongo, O., & Ojah, K. (2016). Does infrastructure really explain economic growth in Sub-Saharan Africa? Review of Development Finance, 6(2), 105-125.
Law, S. H., Azman-Saini, W. N. W., & Ibrahim, M. H. (2013). Institutional Quality Thresholds and the Finance–Growth Nexus. Journal of Banking & Finance, 37(12), 5373-5381.
Lobo, J., & Rantisi, N. M. (1999). Investment in Infrastructure as Determinant of Metropolitan Productivity. Growth and Change, 30(1), 106-127. https://doi:10.1111/0017-4815.00106.
Matthews, R. C. O. (1986). The Economics of Institutions and Sources of Growth. The Economic Journal, 96(384), 903-918.
Mullen, J. (2017). China posts weakest annual economic growth in 26 years. Retrieved February 16, 2020, from http://money.cnn.com/2017/01/19/news/economy/china-fourth-quarter-gdp-economic-growth
Munnell, A. H. (1990b). How does public infrastructure affect regional economic performance? Retrieved March 5, 2020, from http://www.bostonfed.org/economic/neer/neer1990/neer590b.pdf
Noland, M., & Pack, H. (2003). Industrial Policy in an Era of Globalization: Lessons from Asia. Washington, DC: Institute for International Economics.
North, D. C. (1990). Institutions, Institutional Change and Economic Performance. New York: Cambridge University Press.
North, D. C., & Thomas, R. P. (1973). The rise of the western world: A new economic history. New York: Cambridge University Press.
Ogbaro, E. O., & Omotoso, D. C. (2016). Impact of Infrastructure Development on Economic Growth in Nigeria. Nigerian Journal of Management Sciences, 5(1), 279-285.
Okada, K. (2013). The interaction effects of financial openness and institutions on international capital flows. Journal of Macroeconomics, 35, 131-143.
Okoh, A. S., & Ebi, B. O. (2013). Infrastructure investment, institutional quality, and economic growth in Nigeria: An interactive approach. European Journal of Humanities and Social Sciences, 26(1), 1343-1358.
Organization for Economic Cooperation and Development (2012). Mapping Support for Africa's Infrastructure Investment. Retrieved August 21, 2019, from www.oecd.org/daf/inv/investmentpolicy/MappingReportWeb.pdf
Pina, A. M., & Aubyn, M. S. (2005). Comparing macroeconomic returns on human and public capital: An empirical analysis of the Portuguese case (1960–2001). Journal of Policy Modeling, 27(5), 585-598.
Rodrik, D. (2007) One Economics Many Recipes: Globalization, Institutions, and Economic Growth. New Jersey: Princeton University Press.
Seethepalli, K., Bramati, M. C., & Veredas, D. (2008). How Relevant Is Infrastructure to Growth in East Asia? Retrieved December 30, 2019, from http://documents.worldbank.org/curated/en/845081468234277536/pdf/wps4597.pdf
Seo, M. H., & Shin, Y. (2016). Dynamic panels with threshold effect and endogeneity. Journal of Econometrics, 195(2), 169-186.
Straub, S., Vellutini, C., & Warlters, M. (2008). Infrastructure and economic growth in East Asia. Retrieved December 30, 2019, from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1019.6135&rep=rep1&type=pdf
Vijverberg, C. P. C., & Vijverberg, W. P. (2007). Diagnosing the productivity effect of public capital in the private sector. Eastern Economic Journal, 33(2), 207-230.
Vukeya, V. (2015). The impact of infrastructure investment on economic growth in South Africa. Retrieved July 29, 2019, from https://pdfs.semanticscholar.org/a7ea/ad23eb80d8d05f1dc63477fd7e0bb20d17e2.pdf
Williamson, O. E. (1985). The economic institutions of capitalism. New York: New York Free Press.
Wu, S. Y., Tang, J. H., & Lin, E. S. (2010). The impact of government expenditure on economic growth: How sensitive to the level of development? Journal of Policy Modelling, 32(6), 804-817.
Yamano, N., & Ohkawara, T. (2000). The Regional Allocation of Public Investment: Efficiency or Equity? Journal of Regional Science, 40(2), 205–229.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations