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

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Author Info

  • Douglas Sutherland
  • Sonia Araujo
  • Balázs Égert
  • Tomasz Kozluk

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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Bibliographic Info

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

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Date of creation: 24 Mar 2009
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Handle: RePEc:oec:ecoaaa:686-en

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Related research

Keywords: growth; investment; regulation; network industry; investissement; croissance; industrie de réseau; infrastructure; régulation;

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Cited by:
  1. repec:cge:warwcg:90 is not listed on IDEAS
  2. Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
  3. Paul Conway & Sean Dougherty & Artur Radziwill, 2010. "Long-term growth and policy challenges in the large emerging economies," OECD Economics Department Working Papers 755, OECD Publishing.
  4. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.
  5. Tom Ferris & Theo Thomas, 2009. "Review of Public Investment Management Performance (PIMP) in an Economic Crisis," World Bank Other Operational Studies 10532, The World Bank.
  6. Kennedy, Christopher & Corfee-Morlot, Jan, 2013. "Past performance and future needs for low carbon climate resilient infrastructure– An investment perspective," Energy Policy, Elsevier, vol. 59(C), pages 773-783.
  7. Aswini Kumar Mishra & Kunapareddy Narendra & Bibhu Prasad Kar, 2013. "Growth And Infrastructure Investment In India: Achievements, Challenges, And Opportunities," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(196), pages 51-70, January â.
  8. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 2010. "The economics of infrastructure finance: Public-Private Partnerships versus public provision," EIB Papers 2/2010, European Investment Bank, Economics Department.
  9. Wagenvoort, Rien & de Nicola, Carlo & Kappeler, Andreas, 2010. "Infrastructure finance in Europe: Composition, evolution and crisis impact," EIB Papers 1/2010, European Investment Bank, Economics Department.

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