The regional impact of infrastructure investment in Mexico

Looney R. and Frederiksen P. (1981) The regional impact of infrastructure investment in Mexico, Reg. Studies 15, 285–296. Using multiple regression analysis, production functions are estimated for Mexico to examine whether infrastructure's impact on GDP differs depending on the type of investment (economic or social overhead capital) or the type of recipient region (intermediate or lagging). This possibility has been suggested by Hansen. The states were grouped by means of cluster analysis. The results tend to confirm the Hansen thesis: economic overhead capital has had its greatest impact on GDP in intermediate regions while social overhead capital has had its greatest impact in lagging regions. A test for causality indicates that investment precedes income growth. Several policy recommendations are offered on the basis of these results.