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Infrastructure in developing countries: An overview of some economic issues

  • Dethier, Jean-Jacques
  • Moore, Alexander

This paper surveys the main issues and controversies in the economic literature on infrastructure in developing countries. Section I reviews the evidence on the role of infrastructure in promoting economic growth. It is argued that, although infrastructure may be more important for growth than other types of capital, the exact size and form of its effect is less clear than is often assumed. Section II looks at the issue of infrastructure “needs”, estimates of which are pervasive in both the academic and policy literature. It is argued that the preoccupation with such estimates is largely misplaced. More crucial is to develop systems of infrastructure enabling competition through an appropriate market structure. Therefore, section III reviews the economic fundamentals of infrastructure and the available market structure options and section IV considers means to attract and enable private investment. This is an important means of encouraging competition which has been amongst the top priorities of multilateral banks such as the World Bank or the European Investment Bank. Finally, section V reviews some of the literature debating whether public investment is fundamentally more cost-effective than private investment in infrastructure. There has been renewed interest in this question since the onset of the 2008 global financial crisis, with many countries now seriously questioning the rationale of replacing public with private finance.

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Paper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 123305.

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Date of creation: Apr 2012
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Handle: RePEc:ags:ubzefd:123305
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  2. Antonio Estache & L. Wren-Lewis, 2009. "Towards a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," ULB Institutional Repository 2013/43903, ULB -- Universite Libre de Bruxelles.
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  4. Leonardo Felli & Kevin Roberts, 2011. "Does Competition Solve the Hold-up Problem?," STICERD - Theoretical Economics Paper Series 561, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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  11. Estache, Antonio & Perelman, Sergio & Trujillo, Lourdes, 2005. "Infrastructure performance and reform in developing and transition economies: evidence from a survey of productivity measures," Policy Research Working Paper Series 3514, The World Bank.
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  13. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  14. Estache, Antonio & Guasch, Jose-Luis & Iimi, Atsushi & Trujillo, Lourdes, 2008. "Multidimensionality and renegotiation : evidence from transport-sector public-private-partnership transactions in Latin America," Policy Research Working Paper Series 4665, The World Bank.
  15. Canning, David, 1998. "A Database of World Stocks of Infrastructure, 1950-95," World Bank Economic Review, World Bank Group, vol. 12(3), pages 529-47, September.
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  17. Duggal, Vijaya G. & Saltzman, Cynthia & Klein, Lawrence R., 2007. "Infrastructure and productivity: An extension to private infrastructure and it productivity," Journal of Econometrics, Elsevier, vol. 140(2), pages 485-502, October.
  18. Chen, Sheng-Tung & Kuo, Hsiao-I & Chen, Chi-Chung, 2007. "The relationship between GDP and electricity consumption in 10 Asian countries," Energy Policy, Elsevier, vol. 35(4), pages 2611-2621, April.
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