The Effect of Infrastructure on Long Run Economic Growth

Peter Pedroni and David Canning
Additional contact information
Peter Pedroni: Williams College
David Canning: Harvard University

No 2004-04, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: We investigate the long run consequences of infrastructure provision on per capita income in a panel of countries over the period 1950-1992. Simple panel based tests are developed which enable us to isolate the sign and direction of the long run effect of infrastructure on income in a manner that is robust to the presence of unknown heterogeneous short run causal relationships. Our results provide clear evidence that in the vast majority of cases infrastructure does induce long run growth effects. But we also find a great deal of variation in the results across individual countries. Taken as a whole, the results demonstrate that telephones, electricity generating capacity and paved roads are provided at close to the growth maximizing level on average, but are under-supplied in some countries and over-supplied in others. These results also help to explain why cross section and time series studies have in the past found contradictory results regarding a causal link between infrastructure provision and long run growth.

JEL-codes: H4 O1 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in The Manchester School, 76, 504-527, 2008.

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