Funding schemes for infrastructure investment and poverty alleviation in Africa: Evidence from Guinea‐Bissau

Abstract

This study examines the economic impacts of an infrastructure investment programme in Guinea‐Bissau for the period 2014–2030 using a dynamic computable general equilibrium model. Social accounting matrix (SAM) takes into account informal activities, and the model integrates funding schemes for infrastructure investment. We found that debt‐funded infrastructure investment will generate positive macro‐ and micro‐level externalities in terms of growth and well‐being outcomes across household groups in the urban and rural environments and contribute to inequality reduction. However, direct tax funding scheme is not the best economic development alternative for a country with a low per capita income.

Potential Economic Impacts of Agricultural Growth in Africa: Evidence from Guinea-Bissau

“…It is important to note that investment demand includes gross fixed capital formation and inventory changes. There is also a demand for margin, which reflects the payments for transport, retail, and wholesale trade services to supply commodities to the final consumer (see Cateia et al, 2023). Public consumption of good i at time t (Cgov i;t ) is set as (Equation 4):…”

“…Savard and Adjovi (1998) and Savard (2009) discuss the underlying economic theory. Studies by Boccanfuso et al (2014), Estache et al (2012), andCateia et al (2023) model public investment externalities. In works by Chitiga et al (2016), Vanduzai and Chitiga (2017), and Sangare and Maisonnave ( 2018) using the PEP model, the externality of some public investment in the economy was also propagated via the value-added equation.…”

“…This study relied on the SAM for Guinea-Bissau, which was initially developed by Cabral (2015) from the African Growth and Development Policy Modeling Consortium (AGRODEP) with the support of the International Food Policy Research Institute (IFPRI) and provided comprehensive economic information in 2007. The matrix was updated for 2014 by Cateia et al (2023), taking into account informal activities as described by Thiele and Piazolo (2003). An example of how this is accomplished in the agricultural sector is provided in Table 1.…”

“…In addition to trade and production elasticities, household consumption elasticities are also required to calibrate the model. Based on a CGE model applied to Guinea-Bissau's economy by Cateia et al (2023), we determine these elasticities. Public investment elasticities are sector-specific (Table A1 in Appendix A).…”

“…1 However, in the absence of external financing, macro-stabilization and development measures, especially those designed to reduce poverty, depend entirely on agricultural production. Cateia et al, 2023).…”