Infrastructure, value chains, and economic upgrades

Abstract

Infrastructure development is critical to delivering growth, reducing poverty, and addressing broader development goals, as argued in the World Bank Report Transformation through Infrastructure (2012a). This paper surveys the literature of the linkages between infrastructure investment and economic growth, discusses the role of infrastructure in the participation of global value chains and supporting economic upgrades, highlights the challenges faced the least developed countries, and provides policy recommendations. It suggests that addressing the bottlenecks in infrastructure is a necessary condition to provide a window of opportunity for an economy to develop following its comparative advantage. With the right conditions, good infrastructure can support an economy, particularly a less developed economy, to reap the benefit through the participation in the global value chains to upgrade the economic structure.