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Human and physical infrastructure : public investment and pricing policies in developing countries

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  • Jimenez, Emmanuel
  • DEC
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    Abstract

    Almost by definition, the basis for development is infrastructure - whether services for human infrastructure (health, education, nutrition) or physical infrastructure (transport, energy, water). Although the infrastructure sectors are diverse, what they have in common is that public policy has had a great deal to do with how these services are provided and financed in almost all countries. The author reviews the recent literature on two key aspects of that involvement: investment and pricing. While the quality of the econometric evidence varies, recent literature reinforces the view that human and physical infrastructure are critical for economic growth and the reduction of poverty. And the state is recognized as playing a key role in ensuring the efficient, equitable allocation of resources for infrastructure. Despite many sound theoretical reasons for such public involvement, however, recent studies have shown that it leaves much to be desired in efficiency and equity. One symptom is underinvestment in key subsectors that have high economic returns and that help the poor the most, such as primary education and rural health clinics, in relation to more expensive interventions, such as tertiary education and urban hospitals. Another common malaise is the poor use of scarce resources, leading to low quality (students learning little) and reliability (irregular power and water flows), poor maintenance (dilapilated roads), and inappropriate input use (too many school adminstrators or health workers and not enough books or drugs in producing education health outcomes). Just as market failures necessitate government intervention in the infrastructure sectors, so government failures should be considered in deciding the depth and extent of that intervention. The literature has made some advances in diagnosing these problems in poor countries and proposing solutions. But information gaps remain, particularly in developing robust methodologies for: 1) making intersectoral comparisons across the wide range of infrastructure services; 2) crafting more diverse policies about the public-private balance in infrastructure investment, depending on the nature of"public goods"characteristics for various types of infrastructure services, or even across activities for the same service (for example, power transmission versus distribution); and 3) taking issues of political economy into account, such as the vested interests of those with large financial interests in infrastructure. The author also highlights public pricing as a policy initiative that has recently gotten much attention.After briefly reviewing the basic concepts of pricing, he focuses on the literature about pricing reform. Most commonly, the public sector is the main provider of infrastructure services, usually free or at subsidized prices. But the recent literature has aired a rethinking of the balance between public and private financing of infrastructure. The debate in this area is often heated. Health and education are traditionally provided free and some recent literature argues for positive prices, at least for higher tiers of service. The principle of public pricing has been more widely accepted in transport, energy, and to a lesser extent water, but often the levels are too low and do not provide the appropriate incentives for efficient and equitable use.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1281.

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    Date of creation: 30 Apr 1994
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    Handle: RePEc:wbk:wbrwps:1281

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    Related research

    Keywords: Environmental Economics&Policies; Banks&Banking Reform; Health Monitoring&Evaluation; Public Sector Economics&Finance; Economic Theory&Research;

    References

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    1. Gary S. Becker & Kevin M. Murphy & Robert Tamura, . "Human Capital, Fertility, and Economic Growth," University of Chicago - Population Research Center 90-5a, Chicago - Population Research Center.
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    7. Srinivasan, T.N. & Raut, L.K., 1992. "Theories of Long-Run Growth: Old and New," Papers 676, Yale - Economic Growth Center.
    8. Heller, Peter S., 1982. "A model of the demand for medical and health services in Peninsular Malaysia," Social Science & Medicine, Elsevier, vol. 16(3), pages 267-284, January.
    9. Hammer, Jeffrey S., 1993. "Prices and protocols in public health care," Policy Research Working Paper Series 1131, The World Bank.
    10. Randell P. Ellis & Germano M. Mwabu, 2004. "The Demand for Outpatient Medical Care in Rural Kenya," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-140, Boston University - Department of Economics.
    11. Chhibber, Ajay & Dailami, Mansoor, 1990. "Fiscal policy and private investment in developing countries : recent evidence on key selected issues," Policy Research Working Paper Series 559, The World Bank.
    12. Eskeland, Gunnar S & Jimenez, Emmanuel, 1992. "Policy Instruments for Pollution Control in Developing Countries," World Bank Research Observer, World Bank Group, vol. 7(2), pages 145-69, July.
    13. Weale, Martin, 1992. "Education, externalities, fertility, and economic growth," Policy Research Working Paper Series 1039, The World Bank.
    14. Jimenez, Emmanuel & Paqueo, Vicente & de Vera, Ma. Lourdes, 1988. "Does local financing make primary schools more efficient : the Philippine case," Policy Research Working Paper Series 69, The World Bank.
    15. Heggie, Ian G. & Fon, Vincy, 1991. "Optimal user charges and cost recovery for roads in developing countries," Policy Research Working Paper Series 780, The World Bank.
    16. Lewis, Maureen A. & Parker, Clover, 1991. "Policy and implementation of user fees in Jamaican public hospitals," Health Policy, Elsevier, vol. 18(1), pages 57-85, June.
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    18. Jimenez, Emmanuel & Lockheed, Marlaine E & Paqueo, Vicente, 1991. "The Relative Efficiency of Private and Public Schools in Developing Countries," World Bank Research Observer, World Bank Group, vol. 6(2), pages 205-18, July.
    19. Moock, Peter R. & Leslie, Joanne, 1986. "Childhood malnutrition and schooling in the Terai region of Nepal," Journal of Development Economics, Elsevier, vol. 20(1), pages 33-52.
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    Cited by:
    1. World Bank, 2004. "Zambia - Country Economic Memorandum : Policies for Growth and Diversification, Volume 1. Main Report," World Bank Other Operational Studies 15666, The World Bank.
    2. Ahuja, Vinod & Filmer, Deon, 1995. "Educational attainments in developing countries : new estimates and projections disaggregated by gender," Policy Research Working Paper Series 1489, The World Bank.
    3. Lofgren, Hans & Thurlow, James & Robinson, Sherman, 2004. "Prospects for growth and poverty reduction i n Zambia, 2001-2015," DSGD discussion papers 11, International Food Policy Research Institute (IFPRI).

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