The Economic and Welfare Impact of Investment in Transport Infrastructure in Africa: a dynamic computable general equilibrium model analysis

This study investigates the effects of public investment in transport infrastructure in six African countries using a dynamic computable general equilibrium model. The analysis calculates externality coefficients for each period to assess the impact on sectoral output and other economic variables. The findings suggest that the effectiveness of infrastructure investment depends on initial infrastructure levels and national production structure. Notably, transport investment funded through value-added tax generates the highest externalities, leading to increased output, private investment, household income, and welfare. However, the overall growth rate decreases over time. The study also highlights a potential risk of Dutch Disease when relying on external debt for transport infrastructure development in certain countries, emphasizing the importance of domestic financing. The findings suggest that governments should prioritize VAT financing for transport infrastructure, focus on productive infrastructure, and carefully assess potential crowding-out effects.