Infrastructure and Growth: Empirical Evidence
57 Pages Posted: 16 Mar 2009
Date Written: July 14, 2009
Abstract
Investment in network infrastructure can boost long-term economic growth in OECD countries. Moreover, infrastructure investment can have a positive effect on growth that goes beyond the effect of the capital stock because of economies of scale, the existence of network externalities and competition enhancing effects. This paper, which is part of a project examining the links between infrastructure and growth and the role of public policies, reports the results on the links with growth from a variety of econometric approaches. Time-series results reveal a positive impact of infrastructure investment on growth. They also show that this effect varies across countries and sectors and over time. In some cases, these results reveal evidence of possible over-investment, which may be related to inefficient use of infrastructure. Bayesian model averaging of cross-section growth regressions confirm that infrastructure investment in telecommunications and the electricity sectors has a robust positive effect on long-term growth (but not in railways and road networks). Furthermore, this effect is highly nonlinear as the impact is stronger if the physical stock is lower.
Keywords: investment, infrastructure, network industry, economic growth, co-integration, Bayesian model averaging
JEL Classification: E22, O11, O40
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Effects of Infrastructure Development on Growth and Income Distribution
By César A. Calderón and Luis Servén
-
Investing in Infrastructure: What is Needed from 2000 to 2010?
By Marianne Fay and Tito Yepes
-
Infrastructure in Latin America
By César Calderón and Luis Servén
-
Trends in Infrastructure in Latin America, 1980-2001
By César A. Calderón and Luis Servén
-
The Social Rate of Return on Infrastructure Investments
By David Canning and Esra Bennathan
-
By Esther Duflo and Rohini Pande