Public infrastructure and growth: new channels and policy implications

By: Contributor(s): Material type: TextTextSeries: Policy Research Working Paper, no. 4064Publication details: Washington, D. C. World Bank 2006Description: 59 pSubject(s): DDC classification:
  • 338.74 A4P8
Summary: This paper provides an overview of the various channels through which public infrastructure may affect growth. In addition to the conventional productivity, complementarity, and crowding-out effects typically emphasized in the literature, the impact of infrastructure on investment adjustment costs, the durability of private capital, and the production of health and education services are also highlighted. Effects on health and education are well documented in a number of microeconomic studies, but macroeconomists have only recently begun to study their implications for growth. Links between health, infrastructure, and growth are illustrated in an endogenous growth model with transitional dynamics, and the optimal allocation of public expenditure is discussed. The concluding section draws implications of the analysis for the design of strategies aimed at promoting growth and reducing poverty. https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-4064
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This paper provides an overview of the various channels through which public infrastructure may affect growth. In addition to the conventional productivity, complementarity, and crowding-out effects typically emphasized in the literature, the impact of infrastructure on investment adjustment costs, the durability of private capital, and the production of health and education services are also highlighted. Effects on health and education are well documented in a number of microeconomic studies, but macroeconomists have only recently begun to study their implications for growth. Links between health, infrastructure, and growth are illustrated in an endogenous growth model with transitional dynamics, and the optimal allocation of public expenditure is discussed. The concluding section draws implications of the analysis for the design of strategies aimed at promoting growth and reducing poverty.

https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-4064

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