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Infrastructure Investment: Links to Growth and the Role of Public Policies

Author

Listed:
  • Douglas Sutherland

    (OECD)

  • Sonia Araujo

    (OECD)

  • Balázs Égert

    (OECD)

  • Tomasz Koźluk

    (OECD)

Abstract

Investment in network infrastructure – the energy, water, transport and telecommunication networks – which performs a vital role for the functioning of the economy, can contribute to raising growth and social welfare. But more is not always better. While the paper shows that investment in the network industries has had a positive effect over and above the addition to the capital stock, there is evidence that investment in the past has sometimes been misallocated. This paper identifies the policy framework that promotes investment that is conducive to growth and ensures the appropriate use of infrastructure. Central aspects of this framework are identified as a robust decision making process, improving the selection of investment projects, the introduction of competitive pressures through the reduction of barriers to entry and vertical separation when this is appropriate. In addition, efficient investment can be promoted by the combination of regulator independence and the application of incentive regulation. L'investissement dans les réseaux d'infrastructure : Liens à la croissance et le rôle des politiques L’investissement dans les réseaux d’infrastructure, l’énergie, l’eau, le transport et les télécommunications jouant un rôle vital pour le bon fonctionnement de l’économie, peut également contribuer à la croissance économique et au bien-être social. Néanmoins, plus d’investissement n’est pas toujours bénéfique. Nous montrons que l’investissement d’infrastructure a bien eu des effets positifs allant au-delà de celui de l’accumulation du stock du capital, mais qu’il existe parfois des signes de mauvaise allocation de l’investissement dans le passé. Cette étude identifie le cadre de politique économique qui encourage l’investissement favorable à la croissance économique et conduit à un bon usage des réseaux d’infrastructure. Les éléments centraux de ce cadre sont : un processus de prise de décision robuste, une amélioration de la sélection des projets d’investissement, l’introduction de pressions compétitives par le biais d’une baisse des barrières à l’entrée et de l’intégration verticale si nécessaire. De plus, l’efficacité de l’investissement peut être augmentée en combinant indépendance du régulateur et régulation incitative.

Suggested Citation

  • Douglas Sutherland & Sonia Araujo & Balázs Égert & Tomasz Koźluk, 2009. "Infrastructure Investment: Links to Growth and the Role of Public Policies," OECD Economics Department Working Papers 686, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:686-en
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    File URL: http://dx.doi.org/10.1787/225678178357
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    Cited by:

    1. Tom Ferris & Theo Thomas, 2009. "Review of Public Investment Management Performance (PIMP) in an Economic Crisis," World Bank Other Operational Studies 10532, The World Bank.
    2. Balázs Égert, 2015. "Public debt, economic growth and nonlinear effects: Myth or reality?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 226-238.
    3. Bernadette Biatour & Chantal Kegels & Jan van der Linden & Dirk Verwerft, 2017. "Working Paper 01-17 - Public Investment in Belgium - Current State and Economic Impact," Working Papers 1701, Federal Planning Bureau, Belgium.
    4. Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
    5. repec:tkp:fktm17:232-236 is not listed on IDEAS
    6. Paul Conway & Sean Dougherty & Artur Radziwill, 2010. "Long-term growth and policy challenges in the large emerging economies," OECD Economics Department Working Papers 755, OECD Publishing.
    7. Varun Chotia & NVM Rao, 2016. "Public Infrastructure Investment and Economic Growth : A Sector Wise Investigation for India Using Westerlund Panel Cointegration Approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 217-240, March.
    8. Wagenvoort, Rien & de Nicola, Carlo & Kappeler, Andreas, 2010. "Infrastructure finance in Europe: Composition, evolution and crisis impact," EIB Papers 1/2010, European Investment Bank, Economics Department.
    9. Kennedy, Christopher & Corfee-Morlot, Jan, 2013. "Past performance and future needs for low carbon climate resilient infrastructure– An investment perspective," Energy Policy, Elsevier, vol. 59(C), pages 773-783.
    10. Bernadette Biatour & Chantal Kegels, 2015. "Working Paper 06-15 - Labour productivity growth in Belgium - Long-term trend decline and possible actions," Working Papers 1506, Federal Planning Bureau, Belgium.
    11. Jimena Zúñiga & Marcelo Capello & Inés Butler & Nester Grión, 2013. "A Cycle-Adjusted Fiscal Rule for Sustainable and More Equitable Growth in Argentina," IDB Publications (Working Papers) 4638, Inter-American Development Bank.
    12. Aswini Kumar Mishra & Kunapareddy Narendra & Bibhu Prasad Kar, 2013. "Growth And Infrastructure Investment In India: Achievements, Challenges, And Opportunities," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(196), pages 51-70, January –.
    13. Crafts, Nicholas, 2012. "Creating Competitive Advantage: Policy Lessons from History," CAGE Online Working Paper Series 91, Competitive Advantage in the Global Economy (CAGE).
    14. Caroline Klein & Robert W. R. Price & Andreas Wörgötter, 2013. "Improving the Fiscal Framework to Enhance Growth in an Era of Fiscal Consolidation in Slovakia," OECD Economics Department Working Papers 1018, OECD Publishing.
    15. Wouter Thierie & Lieven Moor, 2016. "The characteristics of infrastructure as an investment class," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(3), pages 277-297, August.
    16. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2010. "The economics of infrastructure finance: Public-private partnerships versus public provision," Documentos de Trabajo 276, Centro de Economía Aplicada, Universidad de Chile.
    17. Farhadi, Minoo, 2015. "Transport infrastructure and long-run economic growth in OECD countries," Transportation Research Part A: Policy and Practice, Elsevier, vol. 74(C), pages 73-90.
    18. Åsa Johansson, 2016. "Public Finance, Economic Growth and Inequality: A Survey of the Evidence," OECD Economics Department Working Papers 1346, OECD Publishing.
    19. Michael Regan, 2017. "Capital Markets, Infrastructure Investment and Growth in the Asia Pacific Region," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 5(1), pages 1-28, February.
    20. Chiara DEL BO, 2009. "Recent advances in public investment, fiscal policy and growth," Departmental Working Papers 2009-25, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    21. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.

    More about this item

    Keywords

    croissance; growth; industrie de réseau; infrastructure; investissement; investment; network industry; regulation; régulation;

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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