Infrastructure Investment: Links to Growth and the Role of Public Policies

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Infrastructure Investment: Links to Growth and the Role of Public Policies

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Balázs Égert
Tomasz Kozluk
Douglas Sutherland

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Abstract

Investment in network infrastructure – the energy, water, transport and telecommunication networks – which performs a vital role for the functioning of the economy, can contribute to raising growth and social welfare. But more is not always better. While the paper shows that investment in the network industries has had a positive effect over and above the addition to the capital stock, there is evidence that investment in the past has sometimes been misallocated. This paper identifies the policy framework that promotes investment that is conducive to growth and ensures the appropriate use of infrastructure. Central aspects of this framework are identified as a robust decision making process, improving the selection of investment projects, the introduction of competitive pressures through the reduction of barriers to entry and vertical separation when this is appropriate. In addition, efficient investment can be promoted by the combination of regulator independence and the application of incentive regulation.

L’investissement dans les réseaux d’infrastructure : Liens à la croissance et le rôle des politiques
L’investissement dans les réseaux d’infrastructure, l’énergie, l’eau, le transport et les télécommunications jouant un rôle vital pour le bon fonctionnement de l’économie, peut également contribuer à la croissance économique et au bien-être social. Néanmoins, plus d’investissement n’est pas toujours bénéfique. Nous montrons que l’investissement d’infrastructure a bien eu des effets positifs allant au-delà de celui de l’accumulation du stock du capital, mais qu’il existe parfois des signes de mauvaise allocation de l’investissement dans le passé. Cette étude identifie le cadre de politique économique qui encourage l’investissement favorable à la croissance économique et conduit à un bon usage des réseaux d’infrastructure. Les éléments centraux de ce cadre sont : un processus de prise de décision robuste, une amélioration de la sélection des projets d’investissement, l’introduction de pressions compétitives par le biais d’une baisse des barrières à l’entrée et de l’intégration verticale si nécessaire. De plus, l’efficacité de l’investissement peut être augmentée en combinant indépendance du régulateur et régulation incitative.

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Paper provided by OECD, Economics Department in its series OECD Economics Department Working Papers with number 686.

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Date of creation: 13 Mar 2009
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Handle: RePEc:oec:ecoaaa:686-en

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Find related papers by JEL classification:
H40 - Public Economics - - Publicly Provided Goods - - - General
L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-03-22 (All new papers)

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