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The effects of infrastructure development on growth and income distribution

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Author Info
Calderon, Cesar
Serven, Luis

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Abstract

The authors provide 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), the authors use a variety of generalized-method-of-moments (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: (1) growth is positively affected by the stock of infrastructure assets, and (2) income inequality declines with higher infrastructure quantity and quality. A variety of specification tests suggests 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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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3400.

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Date of creation: 01 Sep 2004
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Handle: RePEc:wbk:wbrwps:3400

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Keywords: Decentralization; Public Sector Economics&Finance; Banks&Banking Reform; Urban Services to the Poor; Urban Services to the Poor; Public Sector Economics&Finance; Banks&Banking Reform; Inequality; Urban Services to the Poor; Urban Services to the Poor;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. César Calderón & Alberto Chong, 2004. "Volume and Quality of Infrastructure and the Distribution of Income: An Empirical Investigation," Review of Income and Wealth, Blackwell Publishing, vol. 50(1), pages 87-106, 03. [Downloadable!] (restricted)
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  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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  7. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-37, July. [Downloadable!] (restricted)
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  8. Marianne Fay & Danny Leipziger & Quentin Wodon & Tito Yepes, 2003. "Achieving the Millennium Development Goals : The role of infrastructure," Policy Research Working Paper Series 3163, The World Bank. [Downloadable!]
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  24. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September. [Downloadable!] (restricted)
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  25. repec:wbp:wbpubs:9780821350393 is not listed on IDEAS
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  27. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank. [Downloadable!]
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  28. Milanovic, Branko & DEC, 1994. "Determinants of cross-country income inequality : an augmented Kuznets hypothesis," Policy Research Working Paper Series 1246, The World Bank. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. P R Agénor, 2005. "Infrastructure Investment and Maintenance Expenditure: Optimal Allocation Rules in a Growing Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 60, Economics, The Univeristy of Manchester. [Downloadable!]
    Other versions:
  2. Suescun, Rodrigo, 2005. "Fiscal space for investment in infrastructure in Colombia," Policy Research Working Paper Series 3629, The World Bank. [Downloadable!]
  3. Iimi, Atsushi, 2007. "Price structure and network externalities in the telecommunications industry : evidence from Sub-Saharan Africa," Policy Research Working Paper Series 4200, The World Bank. [Downloadable!]
  4. Tondl, Gabriele & Prüfer, Patricia, 2007. "Does it Make a Difference? Comparing Growth Effects of European and North American FDI in Latin America," Proceedings of the German Development Economics Conference, Göttingen 2007 26, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
  5. Coviello, Decio & Islam, Roumeen, 2006. "Does aid help improve economic institutions ?," Policy Research Working Paper Series 3990, The World Bank. [Downloadable!]
  6. Jose De Gregorio, 2004. "Economic Growth in Chile: Evidence, Sources and Prospects," Working Papers Central Bank of Chile 298, Central Bank of Chile. [Downloadable!]
  7. Francisco de Castro Fernández & José Manuel González Mínguez, 2008. "The composition of public finances and long-term growth: a macroeconomic approach," Banco de España Occasional Papers 0809, Banco de España. [Downloadable!]
  8. Massimo Florio & Silvia Vignetti, 2005. "Cost-benefit Analysis of Infrastructure Projects in an Enlarged European Union: Returns and Incentives," Economic Change and Restructuring, Springer, vol. 38(3), pages 179-210, December. [Downloadable!] (restricted)
  9. Pedro Coca Castaño & Laura Márquez Ramos & Inmaculada Martínez Zarzoso, 2005. "Infraestructuras, costos de transporte y flujos de comercio," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Economics Department, vol. 20(1), pages 3-22, June. [Downloadable!]
  10. Francisco Rodriguez, 2007. "Have Collapses in Infrastructure Spending led to Cross-Country Divergence in Per Capita GDP?," Working Papers 52, United Nations, Department of Economics and Social Affairs. [Downloadable!]
    Other versions:
  11. Alex William Trew, 2007. " Endogenous Financial Development and Industrial Takeoff," CDMA Working Paper Series 0702, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
  12. Antonio Estache & Atsuhi Iimi, 2008. "Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed," ECARES Working Papers 2008_022, Université Libre de Bruxelles, Ecares. [Downloadable!]
    Other versions:
  13. Mauro Ghinamo & Paolo M. Panteghini & Federico Revelli, 2008. "FDI Determination and Corporate Tax Competition in a Volatile World," Working Papers 0802, University of Brescia, Department of Economics. [Downloadable!]
    Other versions:
  14. Bianca Clausen, 2008. "Real Effective Exchange Rate Uncertainty, Threshold Effects, and Aggregate Investment – Evidence from Latin American Countries," IWP Discussion Paper Series 02/2008, Institute for Economic Policy, Cologne, Germany. [Downloadable!]
  15. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund. [Downloadable!]
  16. Straub, Stephane, 2008. "Infrastructure and development : a critical appraisal of the macro level literature," Policy Research Working Paper Series 4590, The World Bank. [Downloadable!]
    Other versions:
  17. Banerjee, Sudeshna & Diallo, Amadou & Foster, Vivien & Wodon, Quentin, 2009. "Trends in household coverage of modern infrastructure services in Africa," Policy Research Working Paper Series 4880, The World Bank. [Downloadable!]
  18. Briceno-Garmendia, Cecilia & Estache, Antonio & Shafik, Nemat, 2004. "Infrastructure services in developing countries : access, quality, costs and policy reform," Policy Research Working Paper Series 3468, The World Bank. [Downloadable!]
  19. P R Agénor, 2005. "Fiscal Policy and Endogenous Growth with Public Infrastructure," Centre for Growth and Business Cycle Research Discussion Paper Series 59, Economics, The Univeristy of Manchester. [Downloadable!]
    Other versions:
  20. Kevin Joseph Carey & Sanjeev Gupta & Catherine A. Pattillo, 2005. "Sustaining Growth Accelerations and Pro-Poor Growth in Africa," IMF Working Papers 05/195, International Monetary Fund. [Downloadable!]
  21. Verónica Mies & Rodrigo Fuentes, 2005. "Mirando el Desarrollo Económico de Chile: Una Comparación Internacional," Documentos de Trabajo 287, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
    Other versions:
  22. Iimi, Atsushi, 2007. "Infrastructure and trade preferences for the livestock sector : empirical evidence from the beef industry in Africa," Policy Research Working Paper Series 4201, The World Bank. [Downloadable!]
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