IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/2262.html
   My bibliography  Save this paper

How inadequate provision of public infrastructure and services affects private investment

Author

Listed:
  • Reinikka, Ritva
  • Svensson, Jakob

Abstract

Lack of private investment is a serious policy problem in many developing countries, especially in Africa. Despite recent structural reform and stabilization, the investment response to date has been mixed, even among the strongest reformers. The role of poor infrastructure and deficient public services has received little attention in the economic literature, where the effect of public spending and investment on growth is shown to be at best ambiguous. The authors use unique microeconomic evidence to show the effects of poor infrastructure services on private investment in Uganda. They find that poor public capital, proxied by an unreliable and inadequate power supply, significantly reduces productive private investment. Firms ca substitute for inadequate provision of public capital by investing in it themselves. This comes at a cost, however: the installation of less productive capital. These results have clear policy implications. Although macroeconomic reforms and stabilization are necessary conditions for sustained growth and private investment, without an accompanying improvement in the public sector's performance, the private supply response to macroeconomic policy reform is likely to remain limited.

Suggested Citation

  • Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2262
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/01/15/000094946_99122905343032/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, pages 64-111.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Ablo, Emmanuel & Reinikka, Ritva, 1998. "Do budgets really matter? - evidence from public spending on education and health in Uganda," Policy Research Working Paper Series 1926, The World Bank.
    5. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    6. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
    7. Reinikka, Ritva & Svensson, Jakob, 1999. "Confronting competition - investment response and constraints in Uganda," Policy Research Working Paper Series 2242, The World Bank.
    8. Svensson, Jakob, 2000. "Is the bad news principle for real?," Economics Letters, Elsevier, vol. 66(3), pages 327-331, March.
    9. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    10. Easterly, William, 1997. "The ghost of financing gap : how the Harrod-Domar growth model still haunts development economics," Policy Research Working Paper Series 1807, The World Bank.
    11. Tybout, James R, 1983. "Credit Rationing and Investment Behavior in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 598-607, November.
    12. Bigsten, Arne, et al, 1999. " Investment in Africa's Manufacturing Sector: A Four Country Panel Data Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 489-512, November.
    13. Catherine A Pattillo, 1997. "Investment, Uncertainty, and Irreversibility in Ghana," IMF Working Papers 97/169, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Carlos Aparicio & Miguel A. Jaramillo & Cristina San Román, 2011. "Desarrollo de la infraestructura y reducción de la pobreza: el caso peruano," Working Papers 11-00, Centro de Investigación, Universidad del Pacífico, revised Sep 2011.
    2. Stephen S. Everhart & Mariusz A. Sumlinski, 2001. "Trends in Private Investment in Developing Countries : Statistics for 1970-2000 and the Impact on Private Investment of Corruption and the Quality of Public Investment," World Bank Publications, The World Bank, number 13989.
    3. Leonce Ndikumana, 2008. "Can macroeconomic policy stimulate private investment in South Africa? New insights from aggregate and manufacturing sector-level evidence," Journal of International Development, John Wiley & Sons, Ltd., pages 869-887.
    4. Fedderke, J.W. & Bogetic, Z., 2009. "Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures," World Development, Elsevier, pages 1522-1539.
    5. Gunasekera, Kumudu & Anderson, William & Lakshmanan, T.R., 2008. "Highway-Induced Development: Evidence from Sri Lanka," World Development, Elsevier, vol. 36(11), pages 2371-2389, November.
    6. Twine, Edgar E. & Kiiza, Barnabas & Bashaasha, Bernard, 2015. "The Flexible Accelerator Model of Investment: An Application to Ugandan Tea- Processing Firms," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 10(1), March.
    7. Calderon, Cesar & Serven, Luis, 2008. "Infrastructure and economic development in Sub-Saharan Africa," Policy Research Working Paper Series 4712, The World Bank.
    8. Thibaut Dort & Pierre-Guillaume Méon & Khalid Sekkat, 2014. "Does Investment Spur Growth Everywhere? Not Where Institutions Are Weak," Kyklos, Wiley Blackwell, vol. 67(4), pages 482-505, November.
    9. Bogetic, Zeljko & Fedderke, Johannes W., 2006. "Forecasting investment needs in South Africa's electricity and telecommunications sectors," Policy Research Working Paper Series 3829, The World Bank.
    10. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
    11. Anthony Bende-Nabende & Jim Slater, 2003. "Private capital formation: Short- and long-run crowding-in (out) effects in ASEAN, 1971-99," Economics Bulletin, AccessEcon, vol. 3(28), pages 1-16.
    12. Mila Freire & Mario Polèse & Pamela Echeverria, 2003. "Connecting Cities with Macroeconomic Concerns : The Missing Link," World Bank Publications, The World Bank, number 15058.
    13. Janvier Nkurunziza & Floribert Ngaruko, 2002. "Explaining Growth in Burundi: 1960-2000," Economics Series Working Papers WPS/2002-03, University of Oxford, Department of Economics.
    14. Lin, Justin Yifu & Doemeland, Doerte, 2012. "Beyond Keynesianism : global infrastructure investments in times of crisis," Policy Research Working Paper Series 5940, The World Bank.
    15. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024.
    16. Lin, Justin Yifu, 2013. "Global infrastructure initiative and global recovery," Journal of Policy Modeling, Elsevier, vol. 35(3), pages 400-411.
    17. Pargal, Sheoli, 2003. "Regulation and private sector investment in infrastructure - evidence from Latin America," Policy Research Working Paper Series 3037, The World Bank.
    18. Bigsten, Arne & Levin, Jorgen & Persson, Hakan, 2001. "Debt Relief and Growth: A study of Zambia and Tanzania," WIDER Working Paper Series 104, World Institute for Development Economic Research (UNU-WIDER).
    19. Esther K. Ishengoma & Robert Kappel, 2008. "Business Constraints and Growth Potential of Micro and Small Manufacturing Enterprises in Uganda," GIGA Working Paper Series 78, GIGA German Institute of Global and Area Studies.
    20. Causa, Orsetta & Cohen, Daniel, 2006. "Industrial Productivity in 51 Countries, Rich and Poor," CEPR Discussion Papers 5549, C.E.P.R. Discussion Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2262. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.