The role of social and physical infrastructure spending in tradable and non-tradable growth

Hasanov F. F., Mikayilov J., Yusifos S., Aliyev K., Talishinskaya S.

CONTEMPORARY ECONOMICS, vol.13, no.1, pp.79-98, 2019 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 13 Issue: 1
  • Publication Date: 2019
  • Doi Number: 10.5709/ce.1897-9254.300
  • Journal Name: CONTEMPORARY ECONOMICS
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus
  • Page Numbers: pp.79-98
  • Azerbaijan State University of Economics (UNEC) Affiliated: Yes

Abstract

This study investigates the impact of social and physical infrastructure spending on the non-oil tradable and non-tradable sectors while controlling for non-oil capital stock and employment in the Azerbaijani economy for the period 1995-2014. The analysis employs the Engle-Granger and Phillips-Ouliaris cointegration tests using FMOLS estimation results to test for the existence of long-run relationships. The tests results indicate the existence of long-run relationships among the variables. The estimation results reveal positive impacts of both social and physical infrastructure spending on non-oil tradable and non-tradable outputs. However, the impacts on the non-tradable sector are considerably larger than those on the non-oil tradable sector. Developing the non-resource tradable sector, and thereby reducing possibility of the "Resource Curse" and especially the Dutch Disease, is one of the strategic aims of natural resource-rich countries. In this regard, the findings of this research may be useful for Azerbaijani policymakers in taking measures that aim at fostering the development of the non-oil tradable sector, thereby avoiding possible negative outcomes of resource dependency such as the Dutch Disease.