The Impact of Infrastructure Spending in Sub-Saharan Africa : A CGE Modeling Approach

The authors constructed a standard computable general equilibrium (CGE) model to explore the economic impact of increased spending on infrastructure in six African countries: Benin, Cameroon, Mali, Senegal, Tanzania, and Uganda. The basic elements...

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Bibliographic Details
Main Authors:	Perrault, Jean-François, Savard, Luc, Estache, Antonio
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING ADVERSE EFFECT AFFILIATED ORGANIZATIONS AGRICULTURE BANK POLICY BASELINE SCENARIO BUDGET CONSTRAINT BUDGET CONSTRAINTS BUDGETARY ASSISTANCE BUDGETARY IMPACTS CAPITAL ACCOUNT CAPITAL MARKET COMMODITY COMPARATIVE ADVANTAGE COMPARATIVE ANALYSES COMPARATIVE ANALYSIS COMPETITIVENESS COMPUTABLE GENERAL EQUILIBRIUM CONSUMERS CURRENCY CURRENCY APPRECIATION CURRENT ACCOUNT BALANCE DEFICITS DISTRIBUTIONAL IMPACT DIVIDENDS ECONOMIC GROWTH ECONOMIC SECTORS ECONOMIC STRUCTURE ECONOMIC STRUCTURES ELASTICITIES ELASTICITY ELASTICITY OF SUBSTITUTION EQUATIONS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE ADJUSTMENTS EXPENDITURE EXPENDITURES EXPORT PERFORMANCE EXPORT SECTOR EXPORTS EXTERNALITIES EXTERNALITY FACTOR MARKETS FISCAL POLICIES FISCAL POLICY FISCAL SUSTAINABILITY FIXED SHARE FIXED SHARES FUND INVESTMENT GDP GDP DEFLATOR GOVERNMENT BUDGET GOVERNMENT BUDGET CONSTRAINT GOVERNMENT CONSUMPTION GOVERNMENT EXPENDITURE GOVERNMENT INVESTMENTS GOVERNMENT REVENUE GOVERNMENT REVENUES GOVERNMENT SAVINGS GOVERNMENT SPENDING GOVERNMENT SUBSIDIES HOUSEHOLD INCOME IMPORT DUTIES INCOME INCOME EFFECT INCOME TAX INCOME TAXES INFRASTRUCTURE EXPENDITURE INFRASTRUCTURE FINANCING INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INVESTING INVESTMENT EXPENDITURE INVESTMENT GROWTH INVESTMENT NEEDS INVESTMENT OPTION INVESTMENT STRATEGIES LABOR MARKET LOCAL MARKET LOW-INCOME COUNTRIES MACROECONOMIC VARIABLES MACROECONOMICS MARKET PRICE MARKET PRICES MONETARY FUND NATIONAL ACCOUNTS NEGATIVE VALUE OPERATIONAL COSTS OPERATIONAL EXPENDITURES POSITIVE EFFECTS POSITIVE EXTERNALITIES POSITIVE EXTERNALITY PRICE INDEX PRIVATE FIRMS PRIVATE INVESTMENT PRIVATE SAVINGS PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTION STRUCTURE PRODUCTIVE INVESTMENT PRODUCTIVE INVESTMENTS PRODUCTIVITY PUBLIC CAPITAL PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC INVESTMENTS PUBLIC SERVICES REAL EXCHANGE RATE REAL EXCHANGE RATES ROAD CONSTRUCTION SANITATION SUBSTITUTION EFFECT SUSTAINABLE DEVELOPMENT TAX TAX RATE TAX RATES TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL OUTPUT UNEMPLOYMENT UTILITY FUNCTION VALUE ADDED WAGES WORLD MARKET
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100728140341 http://hdl.handle.net/10986/3870

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Summary:	The authors constructed a standard computable general equilibrium (CGE) model to explore the economic impact of increased spending on infrastructure in six African countries: Benin, Cameroon, Mali, Senegal, Tanzania, and Uganda. The basic elements of the model are drawn from EXTER, adjusted to accommodate infrastructure externalities. Seven sectors were considered: food crop agriculture, export agriculture, mining and oil, manufacturing, construction, private services, and public services. Four sets of simulations were conducted: baseline nonproductive investments, roads, electricity, and telecoms. For each set of simulations, five funding schemes were considered: reduced public expenditure; increased value-added taxes; increased import duties; funding from foreign aid; and increased income taxes. In general, the funding schemes had similar qualitative and quantitative effects on macro variables. For road and electricity investment, there were relatively large quantitative differences and some qualitative differences among funding schemes at the macro level. Sectoral analysis revealed further disparities among countries and investment types. The same type of investment with the same funding sources had varying effects depending on the economic structure of the sector in question. The authors find that few sectors are purely tradable or non-tradable, having instead variable degrees of openness to trade. If the current account needs to be balanced, funding investment through foreign aid produces the strongest sectoral effects because strong price and nominal exchange rate adjustments are needed to clear the current account balance. In addition, the capital/labor ratio of each sector plays an important role in determining its winners and losers.

The Impact of Infrastructure Spending in Sub-Saharan Africa : A CGE Modeling Approach

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