Infrastructure: the lessons so far

Infrastructure is often cited as one of the most important drivers of growth. A lot of empirical and field work has been done on infrastructure. What has been the summary of so much work?

It has been put up here in this paper titled ‘Infrastructure:A survey of recent and upcoming issues’ by Antonio Estache, a infrastructure sector specialist at World Bank. The findings are:

  • Benchmarking is as important as making investments in new/existing projects.

  • Infrastructure is still very important for economic growth.

  • As the requirements are huge, It is optimal to raise finances via Public-Private Partnerships  for better efficiency. However, most of the onus would still lie on government as some projects may not get private finance. So taxpayers have a huge role to play.

  • Just delivering infrastructure alone is not enough. It should be delivered in an equitable manner. The author says the tools for equitable distribution are there but are not used.

  • The research on poverty shows that if there is a political will to address the infrastructure needs of the poor in the short to medium run and if the country can’t generate the tax revenue to finance well targeted direct subsidies, well targeted inter-user, inter-usage or inter-regional cross-subsidies can deliver.

  • The research on corruption shows that there is no simple institutional solution to reduce its impact in the sector. And this is where most research would focus as corrpution is a big hindrance in the growth of infrastructure.

It is a small paper and covers a wide amount of literature. It has some surprising facts:

  • One would assume that regulation would lead to more private capital coming into infrastructure and better infrastructure services. But on Page 3, the author shows that many countries that have hardly any regulation in various sectors have attracted private capital. Private Capital sees many more factors like exchange rate risks, political risks etc and regulation alone in not enough.

  • The poor in rich countries have better access to infrastructure than even rich in poor countries.

 The author could have made the writing a bit more simpler and could have talked a bit more on the financing aspects of infrastructure.

Anyways a nice summary on what works and what doesn’t in infrastructure.

One Response to “Infrastructure: the lessons so far”

  1. Assorted Links « Mostly Economics Says:

    […] 4. Jaideep Mishra makes a case for getting our corp debt market going. He also covers a new research paper on infrastructure. I had also mentioned about a similar kind of paper here. […]

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