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The Role of Infrastructure Capital in China’s Regional Economic Growth

  • Shi, Yingying

This paper investigates the role of infrastructure capital in China’s regional economic development during 1990 to 2009 in a neoclassical economic growth model. Four types of infrastructure capital are discussed; electricity, road, rail, and land-line telephone. The results support a positive role of infrastructure in improving economic wellbeing in China. It shows that infrastructure has contributed to the convergence among China’s provinces. However, declining growth momentum from rapid increase of road infrastructure, in particular for the Western region, suggests that road development in the region has been growing too fast. The results counter the conventional wisdom of “road leads to prosperity” widely accepted among national and local governments in China. Thus, the seemingly productive infrastructure capital, when invested beyond a proper level or speed, will become unproductive. The results resonate with the theoretical literature on the inverse U shaped growth impact of infrastructure capital and the dominant “crowding out” of private capital if there is too much infrastructure. They also address the puzzle in the current literature debates as to the direction and magnitude of the growth impact of infrastructure capital.

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File URL: http://purl.umn.edu/126547
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Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 126547.

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Date of creation: 20 Jun 2012
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Handle: RePEc:ags:iaae12:126547
Contact details of provider: Web page: http://www.iaae-agecon.org/
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  1. César Calderón & Luis Servén, 2004. "The Effects of Infrastructure Development on Growth and Income Distribution," Working Papers Central Bank of Chile 270, Central Bank of Chile.
  2. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
  3. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  4. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  5. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
  6. G. William Schwert, 1988. "Tests For Unit Roots: A Monte Carlo Investigation," NBER Technical Working Papers 0073, National Bureau of Economic Research, Inc.
  7. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  8. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  9. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
  10. Zhang, Xiaobo & Fan, Shenggen & Zhang, Linxiu & Huang, Jikun, 2002. "Local governance and public goods provision in rural China:," EPTD discussion papers 93, International Food Policy Research Institute (IFPRI).
  11. Ronald C. Fisher, 1997. "Effects of state and local public services on economic development," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 53-82.
  12. Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1992. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Working Papers 92/106, International Monetary Fund.
  13. Bai, Chong-En & Qian, Yingyi, 2010. "Infrastructure development in China: The cases of electricity, highways, and railways," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 34-51, March.
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