EconPapers    
Economics at your fingertips  
 

Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China

Atif Ansar, Bent Flyvbjerg, Alexander Budzier and Daniel Lunn

Papers from arXiv.org

Abstract: The prevalent view in the economics literature is that a high level of infrastructure investment is a precursor to economic growth. China is especially held up as a model to emulate. Based on the largest dataset of its kind, this paper punctures the twin myths that, first, infrastructure creates economic value, and, second, China has a distinct advantage in its delivery. Far from being an engine of economic growth, the typical infrastructure investment fails to deliver a positive risk adjusted return. Moreover, China's track record in delivering infrastructure is no better than that of rich democracies. Where investments are debt-financed, overinvesting in unproductive projects results in the buildup of debt, monetary expansion, instability in financial markets, and economic fragility, exactly as we see in China today. We conclude that poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems in China. We predict that, unless China shifts to a lower level of higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which is likely also to be a crisis for the international economy. China's infrastructure investment model is not one to follow for other countries but one to avoid.

New Economics Papers: this item is included in nep-cna, nep-tra and nep-tre
Date: 2016-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21) Track citations by RSS feed

Published in Oxford Review of Economic Policy, vol 32, 2016

Downloads: (external link)
http://arxiv.org/pdf/1609.00415 Latest version (application/pdf)

Related works:
Journal Article: Does infrastructure investment lead to economic growth or economic fragility? Evidence from China (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1609.00415

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2019-09-13
Handle: RePEc:arx:papers:1609.00415