Funding schemes for infrastructure investment and poverty alleviation in Africa: Evidence from Guinea-Bissau

Abstract

This study examines the economic impacts of an infrastructure investment programme in Guinea-Bissau for the period 2014–2030 using a dynamic computable general equilibrium model. Social accounting matrix (SAM) takes into account informal activities, and the model integrates funding schemes for infrastructure investment. We found that debt-funded infrastructure investment will generate positive macro- and micro-level externalities in terms of growth and well-being outcomes across household groups in the urban and rural environments and contribute to inequality reduction. However, direct tax funding scheme is not the best economic development alternative for a country with a low per capita income.