The Effect of Infrastructure on Long Run Economic Growth
AbstractWe investigate the long run consequences of infrastructure provision on per capita income in a panel of countries over the period 1950-1992. Simple panel based tests are developed which enable us to isolate the sign and direction of the long run effect of infrastructure on income in a manner that is robust to the presence of unknown heterogeneous short run causal relationships. Our results provide clear evidence that in the vast majority of cases infrastructure does induce long run growth effects. But we also find a great deal of variation in the results across individual countries. Taken as a whole, the results demonstrate that telephones, electricity generating capacity and paved roads are provided at close to the growth maximizing level on average, but are under-supplied in some countries and over-supplied in others. These results also help to explain why cross section and time series studies have in the past found contradictory results regarding a causal link between infrastructure provision and long run growth.
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Bibliographic InfoPaper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2004-04.
Length: 30 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in The Manchester School, 76, 504-527, 2008.
Find related papers by JEL classification:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- H4 - Public Economics - - Publicly Provided Goods
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