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A Theory of Infrastructure-led Development

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  • Pierre-Richard Agénor

Abstract

This paper proposes a theory of long-run development based on public infrastructure as the main engine of growth. The government, in addition to investing in infrastructure, spends on health services, which in turn raise labor productivity and lower the rate of time preference. Infrastructure affects the production of both commodities and health services. As a result of network effects, the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself. This in turn may cause multiplicity of equilibrium growth paths. Provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment outlays, an increase in the share of spending on infrastructure (financed by a cut in unproductive expenditure or foreign grants) may facilitate the shift from a low growth equilibrium, characterized by low productivity and low savings, to a high growth steady state.

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Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 83.

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Length: 48 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:man:cgbcrp:83

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Citations

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Cited by:
  1. Gillanders, Robert, 2013. "Corruption and Infrastructure at the Country and Regional Level," MPRA Paper 46679, University Library of Munich, Germany.
  2. Juliana Dutra Araujo & Grace Bin Li & Marcos Poplawski-Ribeiro & Luis-Felipe Zanna, 2013. "Current Account Norms in Natural Resource Rich and Capital Scarce Economies," IMF Working Papers 13/80, International Monetary Fund.
  3. Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Annals of Economics and Finance, Society for AEF, vol. 11(1), pages 139-153, May.
  4. Emanuele Campiglio, 2013. "The structural shift to green services: A twosector growth model with public capital and open-access resources," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 141, Grantham Research Institute on Climate Change and the Environment.
  5. Kohei Daido & Ken Tabata, 2012. "Public Infrastructures, Production Organizations, and Economic Development," Discussion Paper Series, School of Economics, Kwansei Gakuin University 93, School of Economics, Kwansei Gakuin University, revised Aug 2012.
  6. Agenor, Pierre-Richard & Dinh, Hinh T., 2013. "Social capital, product imitation and growth with learning externalities," Policy Research Working Paper Series 6607, The World Bank.
  7. Will Clark & Birgir Arnason, 2014. "Surging Investment and Declining Aid: Evaluating Debt Sustainability in Rwanda," IMF Working Papers 14/51, International Monetary Fund.
  8. Pierre-Richard Agénor & Joshua Aizenman, 2007. "Aid Volatility and Poverty Traps," NBER Working Papers 13400, National Bureau of Economic Research, Inc.
  9. Santiago Acosta-Ormaechea & Atsuyoshi Morozumi, 2013. "Can a Government Enhance Long-run Growth by Changing the Composition of Public Expenditure?," Discussion Papers 2013/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  10. Eugenia Vella & Evangelos V. Dioikitopoulos & Sarantis Kalyvitis, 2012. "Green Spending Reforms, Growth and Welfare with Endogenous Subjective Discounting," DEGIT Conference Papers c017_045, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper Series, The Rimini Centre for Economic Analysis 53_13, The Rimini Centre for Economic Analysis.
  12. Eleftherios Goulas & Athina Zervoyianni, 2013. "The Growth-Crime Relationship: Are There any Asymmetries?," Working Paper Series, The Rimini Centre for Economic Analysis 54_13, The Rimini Centre for Economic Analysis.
  13. Taotao Deng & Shuai Shao & Lili Yang & Xueliang Zhang, 2014. "Has the transport-led economic growth effect reached a peak in China? A panel threshold regression approach," Transportation, Springer, Springer, vol. 41(3), pages 567-587, May.
  14. Issouf Samaké, 2008. "Investment and Growth Dynamics," IMF Working Papers 08/120, International Monetary Fund.
  15. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, Springer, vol. 17(3), pages 235-266, September.
  16. Santiago Acosta Ormaechea & Atsuyoshi Morozumi, 2013. "Can a Government Enhance Long-Run Growth by Changing the Composition of Public Expenditure?," IMF Working Papers 13/162, International Monetary Fund.
  17. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 53(4), pages 380-392.

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