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Infrastructure in developing countries: An overview of some economic issues

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  • Dethier, Jean-Jacques
  • Moore, Alexander

Abstract

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.

Suggested Citation

  • Dethier, Jean-Jacques & Moore, Alexander, 2012. "Infrastructure in developing countries: An overview of some economic issues," Discussion Papers 123305, University of Bonn, Center for Development Research (ZEF).
  • Handle: RePEc:ags:ubzefd:123305
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    File URL: http://purl.umn.edu/123305
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    3. 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.
    4. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2013. "The Basic Public Finance Of Public–Private Partnerships," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 83-111, February.
    5. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    6. Antonio Estache & MartÌn A. Rossi, 2002. "How Different Is the Efficiency of Public and Private Water Companies in Asia?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 139-148, June.
    7. J. M. Albala-Bertrand & E. C. Mamatzakis, 2007. "The Impact Of Disaggregated Infrastructure Capital On The Productivity Growth Of The Chilean Economy," Manchester School, University of Manchester, vol. 75(2), pages 258-273, March.
    8. Leonardo Felli & Kevin Roberts, 2016. "Does Competition Solve the Hold-up Problem?," Economica, London School of Economics and Political Science, vol. 83(329), pages 172-200, 01.
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    Citations

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    Cited by:

    1. Inderst, Georg, 2013. "Private infrastructure finance and investment in Europe," EIB Working Papers 2013/02, European Investment Bank (EIB).
    2. repec:taf:irapec:v:31:y:2017:i:6:p:734-753 is not listed on IDEAS
    3. Dethier, Jean-Jacques, 2013. "Coping with urban fiscal stress around the world," Policy Research Working Paper Series 6693, The World Bank.

    More about this item

    Keywords

    Infrastructure; Developing Countries; Economic Growth; Regulation; Community/Rural/Urban Development; Institutional and Behavioral Economics; L9; L16; O16; O2;

    JEL classification:

    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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