The Role and Impact of Infrastructure in Middle-Income Countries: Anything Special?

34 Pages Posted: 30 May 2018

See all articles by Abdul Abiad

Abdul Abiad

Asian Development Bank

Margarita Debuque-Gonzales

University of the Philippines, Diliman - School of Economics

Andrea Loren Sy

Asian Development Bank

Date Written: August 2017

Abstract

We examine the evolution of infrastructure, and the impact of infrastructure investment, in middle-income countries (MICs). We document how different types of infrastructure stocks, as well as infrastructure investment, vary with the level of development and growth performance. We then use the two-stage approach of Corsetti, Meier, and Müller (2012) to identify exogenous public investment shocks and investigate the macroeconomic impact of these shocks. We find that the provision of infrastructure varies across development stages; there is a focus on basic infrastructure, such as transport, water, and sanitation, during early stages, and an emphasis on “advanced” infrastructure, such as power and especially information and communication technology, in later stages. Better-performing MICs tend to invest more in infrastructure. They also have more information and communication technology infrastructure. Finally, we find a more significant and sustained impact of exogenous public investment shocks on output in MICs than in low-income countries.

Keywords: economic development, infrastructure, middle income

JEL Classification: H54, O18, O40, Q40

Suggested Citation

Abiad, Abdul and Debuque-Gonzales, Margarita and Sy, Andrea Loren, The Role and Impact of Infrastructure in Middle-Income Countries: Anything Special? (August 2017). Asian Development Bank Economics Working Paper Series No. 518. Available at SSRN: https://ssrn.com/abstract=3187785 or http://dx.doi.org/10.2139/ssrn.3187785

Abdul Abiad (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Margarita Debuque-Gonzales

University of the Philippines, Diliman - School of Economics ( email )

Encarnacion Hall
F. M. Guerrero corner S. Osmena Sts
U.P. Diliman, Quezon City
Philippines

Andrea Loren Sy

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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