Infrastructure in developing countries: An overview of some economic issues
AbstractThis paper surveys the main issues and controversies in the economic literature on infrastructure in developing countries. Section I reviews the evidence on the role of infrastructure in promoting economic growth. It is argued that, although infrastructure may be more important for growth than other types of capital, the exact size and form of its effect is less clear than is often assumed. Section II looks at the issue of infrastructure “needs”, estimates of which are pervasive in both the academic and policy literature. It is argued that the preoccupation with such estimates is largely misplaced. More crucial is to develop systems of infrastructure enabling competition through an appropriate market structure. Therefore, section III reviews the economic fundamentals of infrastructure and the available market structure options and section IV considers means to attract and enable private investment. This is an important means of encouraging competition which has been amongst the top priorities of multilateral banks such as the World Bank or the European Investment Bank. Finally, section V reviews some of the literature debating whether public investment is fundamentally more cost-effective than private investment in infrastructure. There has been renewed interest in this question since the onset of the 2008 global financial crisis, with many countries now seriously questioning the rationale of replacing public with private finance.
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Bibliographic InfoPaper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 123305.
Date of creation: Apr 2012
Date of revision:
Infrastructure; Developing Countries; Economic Growth; Regulation; Community/Rural/Urban Development; Institutional and Behavioral Economics; L9; L16; O16; O2;
Find related papers by JEL classification:
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O2 - Economic Development, Technological Change, and Growth - - Development Planning and Policy
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