How productive is public investment? Evidence from formal and informal production in India

• 成果类型: Article
• 署名作者: Chatterjee, Santanu; Lebesmuehlbacher, Thomas; Narayanan, Abhinav
• 署名单位: University System of Georgia; University of Georgia; University System of Ohio; Xavier University; Reserve Bank of India
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2021.102625
• 发表日期: 2021
• 关键词: Informal sector; Formal sector; public investment; Output elasticity; quantile regression; Golden Quadrilateral; infrastructure; Manufacturing; INDIA

摘要

We use firm-level data on formal and informal production in India to examine the sectoral consequences of government investment in public infrastructure. Our results indicate that proximity to highway infrastructure, time since project completion, and firm size are important determinants of the sectoral effects of infrastructure on firm productivity. First, we show that while public capital is associated with a positive and significant output elasticity for formal sector firms, it has no systematic effect on informal firms. Next, using a major highway construction project in India, we show that proximity to a newly completed highway and the time since project completion are productivity-enhancing for formal firms, with these benefits distributed evenly across firm size in that sector. By contrast, similar benefits do not accrue to informal firms. Specifically, the presence of large firms in areas close to a newly completed highway crowds out the output of small informal firms, thereby mitigating the overall benefits of public investment for the informal sector.