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Infrastructure and Growth: Empirical Evidence

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  • Balazs Egert
  • Tomasz Kozluk
  • Douglas Sutherland

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 competition enhancing effects. This paper analyses the empirical relationship between infrastructure and economic growth. 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. Bayesian model averaging of cross-section growth regressions confirms 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.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2700.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2700

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Keywords: investment; infrastructure; network industry; economic growth; cointegration; Bayesian model averaging;

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Citations

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Cited by:
  1. Yu-Fu Chen & Michael Funke, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," Dundee Discussion Papers in Economics 225, Economic Studies, University of Dundee.
  2. Hans Pitlik, 2010. "Fiscal Governance and Government Investment in Europe since the 1990s," WIFO Working Papers 370, WIFO.
  3. Kyoung-Youn Na & Chirok Han & Chang-Ho Yoon, 2013. "Network effect of transportation infrastructure: a dynamic panel evidence," The Annals of Regional Science, Springer, vol. 50(1), pages 265-274, February.
  4. Robert P. Hagemann, 2012. "Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?," OECD Economics Department Working Papers 937, OECD Publishing.
  5. Céline BONNEFOND, 2013. "Growth dynamics and conditional convergence among Chinese provinces: a panel data investigation using system GMM estimator," Cahiers du GREThA 2013-23, Groupe de Recherche en Economie Théorique et Appliquée.
  6. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  7. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "The Macroeconomic Impact of Infrastructures: A Literature Review and Empirical Analysis on the Case of Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 1, March.
  8. Shekhar Aiyar & Romain A Duval & Damien Puy & Yiqun Wu & Longmei Zhang, 2013. "Growth Slowdowns and the Middle-Income Trap," IMF Working Papers 13/71, International Monetary Fund.
  9. Uppenberg, Kristian & Strauss, Hubert & Wagenvoort, Rien, 2011. "Financing infrastructure," EIB Economic Surveys, European Investment Bank, number 3.
  10. Eisgruber, Lasse, 2013. "The resource curse: Analysis of the applicability to the large-scale export of electricity from renewable resources," Energy Policy, Elsevier, vol. 57(C), pages 429-440.
  11. International Monetary Fund, 2010. "Post-Crisis Fiscal Policy Priorities for the AsEAN-5," IMF Working Papers 10/252, International Monetary Fund.
  12. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series 13/20, New Zealand Treasury.

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