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Infrastructure development and economic growth in China

Author

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  • Sahoo, Pravakar
  • Dash, Ranjan Kumar
  • Nataraj, Geethanjali

Abstract

China is the fastest growing country in the world for last few decades and one of the defining features of China's growth has been investment-led growth. China's sustained high economic growth and increased competitiveness in manufacturing has been underpinned by a massive development of physical infrastructure. In this context, we investigate the role of infrastructure in promoting economic growth in China for the period 1975 to 2007. Overall, the results reveal that infrastructure stock, labour force, public and private investments have played an important role in economic growth in China. More importantly, we find that Infrastructure development in China has significant positive contribution to growth than both private and public investment. Further, there is unidirectional causality from infrastructure development to output growth justifying China's high spending on infrastructure development since the early nineties. The experience from China suggests that it is necessary to design an economic policy that improves the physical infrastructure as well as human capital formation for sustainable economic growth in developing countries.

Suggested Citation

  • Sahoo, Pravakar & Dash, Ranjan Kumar & Nataraj, Geethanjali, 2010. "Infrastructure development and economic growth in China," IDE Discussion Papers 261, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper261
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    More about this item

    Keywords

    China; Infrastructure; Economic development; Investments; China; Investment; L9 - Industry Studies: Transportation and Utilities; H4 - Publicly provided goods; O1 - Economic development;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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