The Effects of Infrastructure Development on Growth and Income Distribution
AbstractThis paper provides an empirical evaluation of the impact of infrastructure development on economic growth and income distribution using a large panel data set encompassing over 100 countries and spanning the years 1960-2000. The empirical strategy involves the estimation of simple equations for GDP growth and conventional inequality measures, augmented to include among the regressors infrastructure quantity and quality indicators in addition to standard controls. To account for the potential endogeneity of infrastructure (as well as that of other regressors), we use a variety of GMM estimators based on both internal and external instruments, and report results using both disaggregated and synthetic measures of infrastructure quantity and quality. The two robust results are: (i) growth is positively affected by the stock of infrastructure assets, and (ii) income inequality declines with higher infrastructure quantity and quality. A variety of specification tests suggest that these results do capture the causal impact of the exogenous component of infrastructure quantity and quality on growth and inequality. These two results combined suggest that infrastructure development can be highly effective to combat poverty. Furthermore, illustrative simulations for Latin American countries suggest that these impacts are economically quite significant, and highlight the growth acceleration and inequality reduction that would result from increased availability and quality of infrastructure.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_056.
Length: 43 pages
Date of creation: Jun 2005
Date of revision:
Infrastructure; Growth; Income Inequality;
Other versions of this item:
- Cesar A. Calderon & Luis Serven, 2014. "The Effects of Infrastructure Development on Growth and Income Distribution," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 521-534, November.
- Calderon, Cesar & Serven, Luis, 2004. "The effects of infrastructure development on growth and income distribution," Policy Research Working Paper Series 3400, The World Bank.
- César Calderón & Luis Servén, 2004. "The Effects of Infrastructure Development on Growth and Income Distribution," Working Papers Central Bank of Chile 270, Central Bank of Chile.
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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