INFRASTRUCTURE AND GROWTH IN AFRICA development is attributed to larger telephone penetration and improved quality of telecommunication services, as well as a larger electricity-generating capacity. In the case of Botswana, growth attributed to infrastructure development (0.4 percent) increased mostly due to the growth of telecommunication services (quantity and quality) and improved road network (figure 6, panel e).

Finally, Sudan has the largest contribution of infrastructure development on growth in the 15-year study period (0.7 percent), mostly due to a substantial increase in telephone penetration and better-quality electricity provision (including less technical losses). On the other hand, infrastructure explains a decline in growth in Congo and Gabon. The largest decline is experienced in Congo (–0.4 percent), which is explained by a decline in telephone penetration and higher losses in the transmission and distribution of electricity (figure 6, panel f).

The results using the [ **IK** 4] aggregate index—despite including mobile phones in the telecommunications indicator and using length of paved roads rather than total roads—did not change the qualitative nature of the results discussed above. One of the features that we may point out is the increasing dynamism in the mobile phone industry that sparked a boom in the telecommunications sector throughout the world. We can notice the increasing role of telecommunications (thanks to mobile phone services) in explaining growth changes in Africa. For more details on the results with the [ **IK** 4] aggregate index, see tables 5 and 6 and figures 7 and 8.

# Potential growth payoff from infrastructure development among African countries

The next dimension of our analysis aims to use the coefficient estimates in table 2 to calculate the potential increase in economic growth, if the growth determinants of African countries were to be raised to the levels of selected benchmark countries or regions. Following Calderón and Servén (2004a), and Loayza and others (2005) we undertake this analysis at two levels: We decompose growth by its potential sources of growth and present a potential growth surge attributed to an improvement in policy determinants of growth. This information helps us assess the economic importance of infrastructure development as a potential area of opportunity in Africa vis-à-vis other policy determinants of economic growth.

We decompose the potential growth payoff due to infrastructure development into the individual contribution of each infrastructure sector (both in terms of improved quantity and quality). Again, this analysis helps us identify the infrastructure sectors where the country is lagging (relative to some selected benchmark) and, hence, might render higher potential growth benefits.

Before calculating the potential productivity growth payoff of infrastructure development (as well as the payoff from other structural and/or stabilization policies), we need to define the benchmark countries. In what follows, we will describe the benchmark used and describe the values of this benchmark in terms of our variable of interest, the level of infrastructure development:<sup>13</sup>

> 13 Note that the results presented on productivity growth enhancement in the subsequent tables and figures assume that the benchmark for other structural factors, stabilization policies, and level of output per worker need not be similar to the benchmark in infrastructure development.

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