Logistics Infrastructure and Economic Growth

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Logistics Infrastructure and Economic Growth

Omor SharifJaime Ketten

Qun Wang

ECON 705 Spring 2012

Attractions of this research

• Should countries invest on infrastructure?• Could we get money from invest on

infrastructure?• Does it help economic growth?

Empirical studies on Infrastructure and economic growth

• Positive relationship results• Easterly and Rebelo (1993) • World Bank (1994) • Yoshino and Nakahigashi (2000) • Yoshida (2000) • Negative relationship results • Deverajan, Swaroop and Zou (1996) • Mosley (1985) • Kocherlakota and Yi (1996)

Purpose for this research

• To determine whether countries invest in infrastructure

• To examine the relationship between infrastructure and economic growth in different areas

• Data source– World Bank– GDP in 2006 and 2009– 139 countries

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Infrastructure Data

• LPI index published by World Bank as a measure of a country's logistics performance (2006 and 2009)

• The ranking is on a continuous scale between 1- worst to 5- best.

• The factors considered in building LPI index are- Quality of infrastructure Competence of private and public logistics service providers Performance of customs and other borders agency Corruption and transparency Reliability of trading and supply chain.• LPI Based on a world-wide survey of global freight forwarders

and express carriers.

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International LPI: ranking

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Variables

• GDP (RGDPL)• Quality of Trade and Transport Infrastructure• Logistics Performance Index (LPI)• Cell Phone Use per 100 People• Population Density• Urban Population• Life Expectancy• South Asia, Europe, Middle East, Africa, Latin America, • Income Groups: Low, Lowmid, Upmid, OECD

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Variable DF Estimate Error t Value Pr > |t| Intercept 1 0.079184 0.011574 6.84 <.0001 inf06 1 -0.02156 0.004314 -5.00 <.0001

R-Square 0.15424

Variable DF Estimate Error t Value Pr > |t| Intercept 1 0.047034 0.030662 1.53 0.1274inf06 1 -0.02229 0.004361 -5.11 <.0001pop06 1 0.002092 0.001848 1.13 0.2595

R-Square 0.16190

SYSLIN procedure / 2 Stage Least Squares EstimationDependent Variable: GROWTH RATE

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Variable DF Estimate Error t Value Pr > |t| Intercept 1 -0.13343 0.111782 -1.19 0.2347inf06 1 -0.02936 0.007459 -3.94 0.0001pop06 1 0.005063 0.007857 0.64 0.5204urb06 1 -0.00252 0.008014 -0.31 0.7533life06 1 0.045055 0.026708 1.69 0.0939

R-Square 0.17625

Variable DF Estimate Error t Value Pr > |t|Intercept 1 0.047090 0.032157 1.46 0.1454inf06 1 -0.02231 0.006150 -3.63 0.0004

pop06 1 0.002048 0.007614 0.27 0.7884urb06 1 0.000047 0.007830 0.01 0.9952

R-Square 0.16189



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Variable DF Estimate Error t Value Pr > |t|

Intercept 1 0.088963 0.144387 0.62 0.5389Inf06 1 -0.04174 0.017179 -2.43 0.0165Pop06 1 -0.00207 0.009822 -0.21 0.8335Urb06 1 0.005389 0.010439 0.52 0.6066Life06 1 0.002069 0.035558 0.06 0.9537Sasia 1 -0.01556 0.018042 -0.86 0.3899Eur 1 -0.00489 0.021609 -0.23 0.8213Mideast 1 -0.03283 0.016991 -1.93 0.0555Afr 1 -0.03444 0.016778 -2.05 0.0421Latam 1 -0.01824 0.016691 -1.09 0.2766Pac 1 -0.00282 0.011531 -0.24 0.8075

R-Square 0.22252


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Variable DF Estimate Error t Value Pr > |t| Intercept 1 -0.05672 0.115236 -0.49 0.6234Inf06 1 -0.02153 0.010927 -1.97 0.0509Pop06 1 0.014199 0.008984 1.58 0.1164Urb06 1 -0.01223 0.009467 -1.29 0.1986Life06 1 0.021142 0.028870 0.73 0.4653Low 1 -0.00069 0.009306 -0.07 0.9410Lowmid 1 0.006006 0.009691 0.62 0.5365Upmid 1 0.024165 0.010778 2.24 0.0267High 1 0.008690 0.010379 0.84 0.4040

R-Square 0.22314



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SYSLIN procedure / 2 Stage Least Squares EstimationDependent Variable: GDP2009

Variable DF Estimate Error t Value Pr > |t| Intercept 1 3.445936 0.363617 9.48 <.0001Inf06 1 2.035044 0.136241 14.94 <.0001

R-Square 0.61957

Variable DF Estimate Error t Value Pr > |t| Intercept 1 6.184289 0.870364 7.11 <.0001Inf06 1 2.111755 0.136616 15.46 <.0001Pop06 1 -0.18063 0.052277 -3.46 0.0007

R-Square 0.63816

SYSLIN procedure / 2 Stage Least Squares EstimationDependent Variable: GDP 2009

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Variable DF Estimate Error t Value Pr > |t| Intercept 1 6.639336 0.854975 7.77 <.0001Inf06 1 1.889878 0.199025 9.50 <.0001Pop06 1 -0.48564 0.218660 -2.22 0.0280Urb06 1 0.326180 0.228213 1.43 0.1552

R-Square 0.68282

Variable DF Estimate Error t Value Pr > |t| Intercept 1 -1.68302 2.429834 -0.69 0.4897Inf06 1 1.348620 0.215298 6.26 <.0001Pop06 1 -0.50418 0.167388 -3.01 0.0031Urb06 1 0.382722 0.175339 2.18 0.0308Life06 1 2.171434 0.610573 3.56 0.0005

R-Square 0.79162


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Variable DF Estimate Error t Value Pr > |t| Intercept 1 0.421419 2.028337 0.21 0.8357Inf06 1 0.622163 0.241328 2.58 0.0111Pop06 1 -0.72212 0.137974 -5.23 <.0001Urb06 1 0.656572 0.146644 4.48 <.0001Life06 1 2.055050 0.499519 4.11 <.0001Sasia 1 -0.29453 0.253456 -1.16 0.2474Eur 1 -0.27386 0.303565 -0.90 0.3687Latam 1 -0.51601 0.234471 -2.20 0.0295Mideast 1 -0.50936 0.238687 -2.13 0.0347Pac 1 -0.67019 0.161988 -4.14 <.0001Afr 1 -0.90382 0.235702 -3.83 0.0002

R-Square 0.88437


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Variable DF Estimate Error t Value Pr > |t| Intercept 1 -1.66727 2.110936 -0.79 0.4311Inf06 1 1.346779 0.200171 6.73 <.0001Pop06 1 -0.31267 0.164575 -1.90 0.0597Urb06 1 0.185938 0.173426 1.07 0.2856Life06 1 2.085674 0.528844 3.94 0.0001Low 1 0.074968 0.170479 0.44 0.6609Lowmid 1 0.530402 0.177533 2.99 0.0034Upmid 1 0.748831 0.197443 3.79 0.0002High 1 0.238451 0.190124 1.25 0.2120

R-Square 0.82865


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Intercept 1 0.075925 0.008270 9.18 <.0001Inf 1 -0.02005 0.003043 -6.59 <.0001

R-Square 0.13588

SYSLIN procedure / 2 Stage Least Squares EstimationDependent Variable: GROWTH RATE (278 Samples)


Intercept 1 0.040119 0.021758 1.84 0.0663Inf 1 -0.02099 0.003080 -6.81 <.0001Pop 1 0.002351 0.001322 1.78 0.0765

R-Square 0.14546

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Variable DF Estimate Error t Value Pr > |t| Intercept 1 0.040833 0.022749 1.79 0.0738Inf 1 -0.02327 0.004727 -4.92 <.0001Pop 1 0.001907 0.005625 0.34 0.7349Popdens 1 4.47E-6 2.601E-6 1.72 0.0869

Urbpop 1 0.000740 0.005852 0.13 0.8995R-Square 0.15388

Variable DF Estimate Error t Value Pr > |t| Intercept 1 -0.14245 0.083282 -1.71 0.0883Inf 1 -0.02844 0.005647 -5.04 <.0001Pop 1 0.004905 0.005702 0.86 0.3904Urbpop 1 -0.00197 0.005872 -0.34 0.7374Life 1 0.045331 0.019947 2.27 0.0238

R-Square 0.15844


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PANEL STUDY RESULTS Dependent Variable: Growth Rate


Intercept 1 0.088116 0.102019 0.86 0.3885Inf 1 -0.03683 0.012165 -3.03 0.0027Pop 1 -0.00155 0.007075 -0.22 0.8266Urbpop 1 0.005111 0.007646 0.67 0.5044Life 1 -0.00231 0.025214 -0.09 0.9272Sasia 1 -0.00874 0.011953 -0.73 0.4653Eur 1 0.004750 0.013975 0.34 0.7342Mideast 1 -0.02836 0.011586 -2.45 0.0150Afr 1 -0.03220 0.012030 -2.68 0.0079Latam 1 -0.01293 0.011370 -1.14 0.2565Pac 1 -0.00196 0.007934 -0.25 0.8055

R-Square 0.21727


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PANEL STUDY RESULTS Dependent Variable: Growth Rate

Variable DF Estimate Error t Value Pr > |t| Intercept 1 -0.03139 0.087912 -0.36 0.7214Inf 1 -0.01520 0.008741 -1.74 0.0832Pop 1 0.016682 0.006715 2.48 0.0136Urbpop 1 -0.01502 0.007236 -2.08 0.0389Life 1 0.011648 0.022310 0.52 0.6020Low 1 0.001844 0.006686 0.28 0.7829Lowmid 1 0.009333 0.007128 1.31 0.1915Upmid 1 0.027541 0.007925 3.48 0.0006High 1 0.006879 0.007229 0.95 0.3422

R-Square 0.20970


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PANEL STUDY RESULTS Dependent Variable: GDP

Variable DF Estimate Error t Value Pr > |t| Intercept 1 3.970727 0.209457 18.96 <.0001Inf 1 1.796615 0.077067 23.31 <.0001

R-Square 0.66320

SYSLIN procedure / 2 Stage Least Squares EstimationDependent Variable: GDP (278 Samples)

Variable DF Estimate Error t Value Pr > |t| Intercept 1 6.856595 0.532143 12.88 <.0001Inf 1 1.872628 0.075337 24.86 <.0001Pop 1 -0.18945 0.032327 -5.86 <.0001

R-Square 0.69289

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Variable DF Estimate Error t Value Pr > |t| Intercept 1 7.519486 0.488020 15.41 <.0001Inf 1 1.612807 0.101404 15.90 <.0001Pop 1 -0.74957 0.120675 -6.21 <.0001Popdens 1 -0.00017 0.000056 -3.01 0.0029Urbpop 1 0.587837 0.125550 4.68 <.0001

R-Square 0.75457

Variable DF Estimate Error t Value Pr > |t| Intercept 1 -3.86567 1.371228 -2.82 0.0052Inf 1 1.031105 0.092984 11.09 <.0001Pop 1 -0.65341 0.093877 -6.96 <.0001Urbpop 1 0.542646 0.096679 5.61 <.0001Life 1 2.847646 0.328421 8.67 <.0001

R-Square 0.84344


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Variable DF Estimate Error t Value Pr > |t| Intercept 1 -0.33207 1.388229 -0.24 0.8111Inf 1 0.482878 0.165530 2.92 0.0038Pop 1 -0.77472 0.096268 -8.05 <.0001Urbpop 1 0.711850 0.104043 6.84 <.0001Life 1 2.324046 0.343100 6.77 <.0001Sasia 1 -0.47846 0.162654 -2.94 0.0036Eur 1 -0.53801 0.190163 -2.83 0.0050Mideast 1 -0.61039 0.157653 -3.87 0.0001Afr 1 -0.97833 0.163700 -5.98 <.0001Latam 1 -0.67231 0.154714 -4.35 <.0001Pac 1 -0.70815 0.107961 -6.56 <.0001

R-Square 0.89413


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Variable DF Estimate Error t Value Pr > |t| Intercept 1 0.308366 1.719194 0.18 0.8578Inf 1 1.633647 0.170932 9.56 <.0001Pop 1 -0.18536 0.131315 -1.41 0.1592Urbpop 1 0.013264 0.141502 0.09 0.9254Life 1 1.546110 0.436299 3.54 0.0005Low 1 0.171979 0.130747 1.32 0.1895Lowmid 1 0.656368 0.139390 4.71 <.0001Upmid 1 0.870375 0.154987 5.62 <.0001High 1 0.234528 0.141373 1.66 0.0983

R-Square 0.81272


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Variable DF Estimate Error t Value Pr > |t| CS1 1 -3.76505 0.1109 -33.94 <.0001CS138 1 -3.19366 0.1014 -31.50 <.0001 Intercept 1 10.41614 0.1366 76.26 <.0001Inf 1 0.032526 0.0313 1.04 0.3000Year 1 0.066734 0.00921 7.25 <.0001

R-Square 0.9985

PANEL Procedure / Fixed One Way EstimatesDependent Var: GDP (Cross Section = 139, Time Series = 2)

Variable DF Estimate Error t Value Pr > |t| CS1 1 -3.10206 0.3313 -9.36 <.0001 CS138 1 -2.24647 0.4577 -4.91 <.0001 Intercept 1 4.678208 2.7091 1.73 0.0865 Inf 1 0.03285 0.0309 1.06 0.2892Pop 1 0.294917 0.1391 2.12 0.0358Year 1 0.051621 0.0116 4.47 <.0001

R-Square 0.9985

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Variable DF Estimate Error t Value Pr > |t| CS1 1 -1.772 0.5441 -3.26 0.0014 CS138 1 -1.38726 0.5272 -2.63 0.0095 Intercept 1 5.471969 2.6440 2.07 0.0404Inf 1 0.048481 0.0304 1.59 0.1134Pop 1 -0.83954 0.3979 -2.11 0.0367Urbpop 1 1.103951 0.3642 3.03 0.0029Year 1 0.026932 0.0139 1.94 0.0542

R-Square 0.9986


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PANEL PROCEDURE RESULTSFIXED ONE WAY ESTIMATES

Dependent Variable: GDP

Variable DF Estimate Error t Value Pr > |t| CS1 1 -1.66941 0.5907 -2.83 0.0054 CS138 1 -1.25496 0.6039 -2.08 0.0396 Intercept 1 3.79932 4.5417 0.84 0.4043Inf 1 0.048505 0.0305 1.59 0.1143Pop 1 -0.77466 0.4239 -1.83 0.0699Urbpop 1 1.033243 0.3971 2.60 0.0103Life 1 0.4083 0.9000 0.45 0.6508

Year 1 0.022866 0.0165 1.38 0.1692R-Square 0.9986


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Parameter Estimate Error t Value Pr > |t| Intercept 0.0730293 0.01176605 6.21 <.0001Inf06 -0.0192010 0.00386650 -4.97 <.0001

R-square 0.1569

SURVEYREG Procedure / Clusters = 139, DOF = 138Dependent Var: Growth Rate

Parameter Estimate Error t Value Pr > |t| Intercept 0.0429448 0.03412800 1.26 0.2104Inf06 -0.0197224 0.00395885 -4.98 <.0001Pop06 0.0019330 0.00207526 0.93 0.3533

R-square 0.1637

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Parameter Estimate Error t Value Pr > |t| Intercept 0.0392951 0.03541769 1.11 0.2692inf06 -0.0181495 0.00473182 -3.84 0.0002pop06 0.0054289 0.00766120 0.71 0.4798urb06 -0.0036768 0.00745685 -0.49 0.6227

R-square 0.1654

SURVEYREG Procedure / Clusters = 139, DOF = 138Dependent Var: Growth Rate

Parameter Estimate Error t Value Pr > |t| Intercept -0.0767370 0.10747903 -0.71 0.4765inf06 -0.0209545 0.00483316 -4.34 <.0001pop06 0.0086201 0.00787032 1.10 0.2753urb06 -0.0067225 0.00777550 -0.86 0.3888life06 0.0282100 0.02556836 1.10 0.2718

R-square 0.1735

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Parameter Estimate Error t Value Pr > |t| Intercept 4.97606535 0.22423336 22.19 <.0001Inf06 1.44786498 0.07111614 20.36 <.0001

R-square 0.6227

SURVEYREG Procedure / Clusters = 139, DOF = 138Dependent Var: GDP 2009

Parameter Estimate Error t Value Pr > |t| Intercept 7.1818017 0.78916487 9.10 <.0001Inf06 1.4860911 0.07035441 21.12 <.0001Pop06 -0.1417202 0.04740760 -2.99 0.0033

R-square 0.6481

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SURVEYREG PROCEDURE REGRESSION RESULTSDependent Variable: GDP2009

Parameter Estimate Error t Value Pr > |t| Intercept 8.2868366 0.68904769 12.03 <.0001Inf06 1.0098468 0.09053863 11.15 <.0001Pop06 -1.2002088 0.16394209 -7.32 <.0001Urb06 1.1132604 0.16460550 6.76 <.0001

R-square 0.7550

SURVEYREG Procedure / Clusters = 139, DOF = 138Dependent Var: GDP 2009

Parameter Estimate Error t Value Pr > |t| Intercept -6.3570985 2.09044902 -3.04 0.0028Inf06 0.6558352 0.07860621 8.34 <.0001Pop06 -0.7974655 0.14381317 -5.55 <.0001Urb06 0.7288757 0.14096802 5.17 <.0001Life06 3.5602720 0.47437483 7.51 <.0001

R-square 0.8458

CONCLUSION

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Both LPI and Trade and Transport Infrastructure seem to positively affect Log(RGDPL). LPI is always significant, while Infrastructure loses significance when each country is accounted for, LPI remains significant.

Upper-middle, Lower-middle, and Low income countries are significantly different from OECD countries. High income (non-OECD) countries are not.

All regions developing countries are significantly different from developed countries.

Change in LPI and change in Infrastructure are not significant, but may positively affect change in Log(RGDPL).

LPI and Infrastructure negatively affect change in Log(RGDPL).

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Logistics Infrastructure and Economic Growth

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