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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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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp957.pdf
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Bibliographic Info

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
Date of revision:
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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References

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Citations

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Cited by:
  1. Pierre-Richard Agénor & Devrim Yilmaz, 2012. "Simple Dynamics of Public Debt with Productive Public Goods," Centre for Growth and Business Cycle Research Discussion Paper Series 165, Economics, The Univeristy of Manchester.
  2. Yu-Fu Chen & Michael Funke, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," CESifo Working Paper Series 2759, CESifo Group Munich.
  3. Uppenberg, Kristian & Strauss, Hubert & Wagenvoort, Rien, 2011. "Financing infrastructure," EIB Economic Surveys, European Investment Bank, number 3.
  4. 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, issue 1, March.
  5. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  6. International Monetary Fund, 2010. "Post-Crisis Fiscal Policy Priorities for the ASEAN-5," IMF Working Papers 10/252, International Monetary Fund.

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