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Infrastructure and Growth: Empirical Evidence

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  • Balazs Egert

    ()

  • Tomasz Kozluk

    ()

  • Douglas Sutherland

    ()

Abstract

Investment in network infrastructure can boost long-term economic growth in OECD countries. Moreover, infrastructure investment can have a positive effect on growth that goes beyond the effect of the capital stock because of economies of scale, the existence of network externalities competition enhancing effects. This paper analyses the empirical relationship between infrastructure and economic growth. Time-series results reveal a positive impact of infrastructure investment on growth. They also show that this effect varies across countries and sectors and over time. In some cases, these results reveal evidence of possible over-investment. Bayesian model averaging of cross-section growth regressions confirms that infrastructure investment in telecommunications and the electricity sectors has a robust positive effect on long-term growth (but not in railways and road networks). Furthermore, this effect is highly nonlinear as the impact is stronger if the physical stock is lower.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp957.

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Length: pages
Date of creation: 01 Apr 2009
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Handle: RePEc:wdi:papers:2009-957

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Keywords: investment; infrastructure; network industry; economic growth; cointegration; Bayesian model averaging;

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Cited by:
  1. Caroline Klein & Robert W.R. Price & Andreas Wörgötter, 2013. "Improving the Fiscal Framework to Enhance Growth in an Era of Fiscal Consolidation in Slovakia," OECD Economics Department Working Papers 1018, OECD Publishing.
  2. Uppenberg, Kristian & Strauss, Hubert & Wagenvoort, Rien, 2011. "Financing infrastructure," EIB Economic Surveys, European Investment Bank, European Investment Bank, number 3.
  3. Michael Funke & Yu-Fu Chen, 2010. "Booms, recessions and financial turmoil: A fresh look at investment decisions under cyclical uncertainty," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 21007, Hamburg University, Department of Economics.
  4. Chen, Yu-Fu & Funke, Michael, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2009-31, Scottish Institute for Research in Economics (SIRE).
  5. Shekhar Aiyar & Romain A Duval & Damien Puy & Yiqun Wu & Longmei Zhang, 2013. "Growth Slowdowns and the Middle-Income Trap," IMF Working Papers 13/71, International Monetary Fund.
  6. Eisgruber, Lasse, 2013. "The resource curse: Analysis of the applicability to the large-scale export of electricity from renewable resources," Energy Policy, Elsevier, Elsevier, vol. 57(C), pages 429-440.
  7. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series 13/20, New Zealand Treasury.
  8. Hans Pitlik, 2010. "Fiscal Governance and Government Investment in Europe since the 1990s," WIFO Working Papers, WIFO 370, WIFO.
  9. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers, WIFO 404, WIFO.
  10. International Monetary Fund, 2010. "Post-Crisis Fiscal Policy Priorities for the AsEAN-5," IMF Working Papers 10/252, International Monetary Fund.
  11. Kyoung-Youn Na & Chirok Han & Chang-Ho Yoon, 2013. "Network effect of transportation infrastructure: a dynamic panel evidence," The Annals of Regional Science, Springer, Springer, vol. 50(1), pages 265-274, February.
  12. Robert P. Hagemann, 2012. "Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?," OECD Economics Department Working Papers 937, OECD Publishing.
  13. Céline BONNEFOND, 2013. "Growth dynamics and conditional convergence among Chinese provinces: a panel data investigation using system GMM estimator," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2013-23, Groupe de Recherche en Economie Théorique et Appliquée.
  14. Valter Di Giacinto & Giacinto Micucci & Pasqualino Montanaro, 2012. "The Macroeconomic Impact of Infrastructures: A Literature Review and Empirical Analysis on the Case of Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, Associazione Rossi Doria, issue 1, March.

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