We introduce infrastructure as a cost-reducing technology in Romer's (1987) model of endogenous growth. We show that infrastructure can promote specialization and long-run growth, even though its effect on the latter is non-monotonic, reflecting its resource costs. We provide evidence using data from the U.S. Census of Manufactures that suggests that the degree of specialization is positively correlated with core infrastructure, as predicted by the model. We also provide evidence from cross-country regressions, using physical measures of infrastructure provision, that shows a robust non-monotonic relationship between infrastructure and growth.
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Find related papers by JEL classification: O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General
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