Network Effects and Infrastructure Productivity in Developing Countries^*

Abstract

This study proposes to investigate the threshold effects in the productivity of infrastructure investment in developing countries. It concludes to their presence in the relationship between output and private and public inputs as well as network effects in the productivity of infrastructure. When the available stock of infrastructure is low, investment has the same productivity as non‐infrastructure investment. On the contrary, when a minimum network is available, the marginal productivity of infrastructure investment is greater than the productivity of other investments. Finally, when the main network is achieved, its marginal productivity becomes similar to the productivity of other investment.

How Does Infrastructure Affect Economic Growth? Insights From a Semiparametric Smooth Coefficient Approach and the Case of Telecommunications in China

“…Instrumenting infrastructure with its lags is widely used in earlier studies (e.g., Candelon, Colletaz, and Hurlin ; Crescenzi and Rodriguez‐Pose ), but has recently been criticized. The literature has suggested various external IVs, all having pros and cons.…”

“…Instead of being included as a factor input, infrastructure is treated in the specification as an environmental variable affecting β 0 and the coefficients of k, l and h. No pre-specified 2. Candelon, Colletaz, and Hurlin (2013) capture nonlinearity in infrastructure's productivity using threshold regression models. Calderón, Moral-Benito, and Servén (2015) adopt the pooled mean-group estimator to allow for parameter heterogeneity.…”

“…In the case of telecoms infrastructure, insights from information economics highlight the role of telecoms in reducing transaction costs through facilitating information flows and raising the quantity and quality of information, improving the functioning of product and factor markets, and reducing Xinefficiency (Leff 1984;Norton 1992). However, the network nature of telecoms infrastructure and the argument about congestion suggest that the existing level of stocks matters for telecoms' productivity (Candelon, Colletaz, and Hurlin 2013;Futagami and Mino 1995). A certain amount of stock must be accumulated before it substantially contributes to production activities (Futagami and Mino 1993;Röller and Waverman 2001).…”

What are the Main Determinants of Renewable Energy Consumption? A Panel Threshold Regression Approach

“…Asymptotic distribution of the test statistic is obtained by bootstrap procedure. The test statistics for 3 and 4 regimes can be found in Candelon et al (2013).…”

Productivity Effects of Public Capital Maintenance: Evidence From U.S. States

“…Similarly, Candelon et al. () find strong threshold effects in the relationship between output and public capital using a Panel‐Smooth‐Threshold model.…”