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Changes in Economic Effect of Infrastructure and Financing Methods: The Japanese Case

In: Japan’s Lost Decade

Author

Listed:
  • Masaki Nakahigashi

    (Niigata University)

  • Naoyuki Yoshino

    (Asian Development Bank Institute (ADBI)
    Keio University)

Abstract

This chapter analyzes the economic effect of infrastructure, focusing on the productivity effect of public investment, and discusses how to promote the private sector investment in infrastructure by enhancing the rate of return to investors by utilizing part of spillover effects from the infrastructure. Traditional highway or railway investment relies on toll fees or train fees, which are often regulated to keep the price low. Private investors find it difficult to obtain an adequate rate of return. This chapter proposes the incremental tax revenues along the highway or railway should contribute a certain fraction of tax revenues (say 30%) to investors in infrastructure. The important factors for further promoting the use of private sector resources in infrastructure development include (i) government involvement in high-risk infrastructure projects and risk sharing between government and the private sector, (ii) an earnings structure that appropriately reflects the spillover effect of infrastructure (e.g., return of some spillover tax revenues to infrastructure investors), and (iii) systems designed to increase incentives for infrastructure-operating entities.

Suggested Citation

  • Masaki Nakahigashi & Naoyuki Yoshino, 2017. "Changes in Economic Effect of Infrastructure and Financing Methods: The Japanese Case," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Japan’s Lost Decade, chapter 0, pages 35-57, Springer.
    • Handle: RePEc:spr:adbchp:978-981-10-5021-3_2
    DOI: 10.1007/978-981-10-5021-3_2
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    Cited by:

    1. Taghizadeh-Hesary, Farhad & Sarker, Tapan & Yoshino, Naoyuki & Mortha, Aline & Vo, Xuan Vinh, 2021. "Quality infrastructure and natural disaster resiliency: A panel analysis of Asia and the Pacific," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 394-406.

    More about this item

    Keywords

    Infrastructure; Productivity effect of public capital; Public-private partnership; Spillover effects;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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