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Sunday Papers

The Sunday Paper – Transport Infrastructure, City Productivity Growth and Sectoral Reallocation: Evidence from China

This beautiful map from the IMF Working Paper highlighted today, which shows the China-wide county by county cost of transportation infrastructure, is only tangentially relevant to the paper’s conclusion. The point it makes though is self evident. The ubiquity of transportation infrastructure, or lack of it, has a lot to do with the cost/ease of its construction.

To the paper then. IMF staffer Yang Yang has produced an academic tour de force but would have created a more approachable work had they born in mind advice by Lord Chesterfield on the subject of smarts.

“Never seem more learned than the people you are with. Wear your learning like a pocket watch and keep it hidden. Do not pull it out to count the hours, but give the time when you are asked.”

The detail of the paper is beyond the casual reader and even a diligent one will wonder how the math-in-plain-sight-peacock-tail-fanning is meant to help us understand the main point which, in fairness is eventually spelt out, and is this; “… that the national highway network in China [Has] promoted production efficiency, delivered sizable welfare gains to consumers, and led to a sectoral reallocation between cities.” All jolly good news and not as intuitive a conclusion as you might think.

There’s still lively discussion among development economists on the cost/benefits of transportation infrastructure. In China’s case this paper thought would appear to have settled the issue, at least with regard to provision of highways.

One valuable addition to the debate contained in the work is an analysis of the counterfactual i.e. what would have happened if China hadn’t developed the national highway system? The answer is total factor productivity would have been affected by between 3.2% and 3.8% which wouldn’t have completely retarded growth but would surely have had a major impact.

The full read, if you dare, can be accessed via the following link Do Highways Work?

Happy Sunday

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