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Infrastructure, Externalities, and Economic Development: A Study of the Indian Manufacturing Industry


  • Charles R. Hulten
  • Esra Bennathan
  • Sylaja Srinivasan


If infrastructure tends to generate spillover externalities, as has been the assumption in much of the development literature, one may reasonably look for evidence of such indirect effects in the accounts of manufacturing industries. Empirical support for this assumption has so far been ambiguous. This analysis of Indian data, however, reveals substantial externality effects from the states' infrastructure to manufacturing productivity. The analysis separates the direct effects of roads and electricity, as mediated by the infrastructure services purchased by manufacturing industries along with other intermediate inputs, from the indirect effects, as measured by the impact of infrastructure capacity on the Solow productivity residual. In the 20 years from 1972 to 1992, growth of road and electricity-generating capacity seems to have accounted for nearly half the growth of the productivity residual of India's registered manufacturing. Copyright 2006, Oxford University Press.

Suggested Citation

  • Charles R. Hulten & Esra Bennathan & Sylaja Srinivasan, 2006. "Infrastructure, Externalities, and Economic Development: A Study of the Indian Manufacturing Industry," World Bank Economic Review, World Bank Group, vol. 20(2), pages 291-308.
  • Handle: RePEc:oup:wbecrv:v:20:y:2006:i:2:p:291-308

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    References listed on IDEAS

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    Cited by:

    1. repec:eee:wdevel:v:96:y:2017:i:c:p:198-215 is not listed on IDEAS
    2. Agarwalla, Astha, 2011. "Agglomeration Economies and Productivity Growth in India," IIMA Working Papers WP2011-01-08, Indian Institute of Management Ahmedabad, Research and Publication Department.
    3. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2016. "Infrastructure, information & communication technology and firms’ productive performance of the Indian manufacturing," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 353-371.
    4. Arup Mitra & Chandan Sharma & Marie-Ange Veganzones, 2011. "Total Factor Productivity and Technical Efficiency of Indian Manufacturing: The Role of Infrastructure and Information & Communication Technology," Working Papers halshs-00597656, HAL.
    5. Marie-Ange VEGANZONES-VAROUDAKIS & Arup MITRA & Chandan SHARMA, 2012. "Are reforms productive? Explaining productivity and efficiency in the Indian manufacturing," Working Papers 201233, CERDI.
    6. Isabelle Joumard & Urban Sila & Hermes Morgavi, 2015. "Challenges and Opportunities of India's Manufacturing Sector," OECD Economics Department Working Papers 1183, OECD Publishing.
    7. Chakraborty Shankha & Dabla-Norris Era, 2011. "The Quality of Public Investment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-29, August.
    8. Sawada, Yasuyuki, 2015. "The Impacts of Infrastructure in Development: A Selective Survey," ADBI Working Papers 511, Asian Development Bank Institute.
    9. Eric Strobl & Marie-Anne Valfort, 2015. "The Effect of Weather-Induced Internal Migration on Local Labor Markets. Evidence from Uganda," World Bank Economic Review, World Bank Group, vol. 29(2), pages 385-412.
    10. Hoekman, Bernard & Mattoo, Aaditya, 2008. "Services trade and growth," Policy Research Working Paper Series 4461, The World Bank.
    11. Lall,Somik V. & Gun Wang, Hyoung & Deichmann, Uwe, 2010. "Infrastructure and City Competitiveness in India," WIDER Working Paper Series 022, World Institute for Development Economic Research (UNU-WIDER).
    12. Changqing Luo & Mengzhen Li & Zisheng Ouyang, 2016. "An Empirical Study on the Correlation Structure of Credit Spreads based on the Dynamic and Pair Copula Functions," China Finance Review International, Emerald Group Publishing, vol. 6(3), pages 284-303, August.
    13. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
    14. repec:ipg:wpaper:2014-460 is not listed on IDEAS
    15. Daido, Kohei & Tabata, Ken, 2013. "Public infrastructure, production organization, and economic development," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 330-346.
    16. Adel Mohsen & Soo Chua & Che Sab, 2015. "Determinants of industrial output in Syria," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-12, December.
    17. repec:eee:trapol:v:60:y:2017:i:c:p:24-33 is not listed on IDEAS

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