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Infrastructure investment and growth in China: A quantitative assessment

Emin Dinlersoz () and Zhe Fu

Journal of Development Economics, 2022, vol. 158, issue C

Abstract: During the period 2003–2016, China’s infrastructure investment as a share of GDP outpaced, by a large margin, the average GDP share of entire government investment in advanced, developing, or emerging economies. A dynamic multi-sector model is constructed to assess the growth effects of this extraordinary investment episode. The model features sectoral heterogeneity in infrastructure intensity and positive externalities from aggregate infrastructure for firms and consumers. Along the model’s transition path, infrastructure investment interacts with labor-augmenting technological progress and structural change in China to generate growth. The benchmark results suggest that infrastructure expansion accounts for 14% of China’s average annual growth rate over the period 2003–2016, but the expansion was socially excessive for nearly the entire period. The analysis examines the sensitivity of the results to the strength of infrastructure externality and quantifies the contribution of various factors to infrastructure-driven growth, including crowding out, structural change, and sectoral heterogeneity in infrastructure intensity.

Keywords: Infrastructure; Government investment; Externality; Crowding-out effect; Structural change; Transitional dynamics; Distortion (search for similar items in EconPapers)
JEL-codes: E22 E62 E65 H23 H44 O23 O41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:158:y:2022:i:c:s0304387822000748

DOI: 10.1016/j.jdeveco.2022.102916

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