Infrastructure and Growth

Abstract

An adequate supply of infrastructure services has long been considered essential for economic development by both academics and policymakers. This article reviews recent theoretical and empirical literature on the effects of infrastructure development on growth. The theoretical literature has employed a variety of analytical settings regarding the drivers of income growth and the degree to which infrastructure represents a public or a private good. In turn, the empirical literature has tested for the growth effects of infrastructure development using various econometric methodologies on time series and cross-section macro- and microeconomic data. However, the empirical tests face challenging issues of measurement, identification and heterogeneity. Overall, the literature finds positive effects of infrastructure development on income growth. Still, the precise mechanisms through which these effects accrue, and their full impact on welfare, remain relatively unexplored.