The Impact of Infrastructure on Development Outcomes: A Qualitative Review of Four Decades of Literature

Vivien Foster, Nisan Gorgulu, Stephane Straub and Maria Vagliasindi

No 10343, Policy Research Working Paper Series from The World Bank

Abstract: Policy makers have long used investing in public infrastructure as a means of reducing geographical disparities and promoting growth. The goal of this paper is to provide insights to development practitioners on designing interventions to maximize the development impact of infrastructure. For this, the paper presents a systematic qualitative overview of the literature, covering more than 300 studies conducted between 1983 and 2022, focusing on specific infrastructure sectors, namely digital, energy, and transport. The study also considers various dimensions of development impact, including output and productivity, poverty and inequality, labor market outcomes, human capital formation, and trade, to develop a nuanced understanding of the mechanisms through which infrastructure contributes to these development outcomes, focusing on low- and middle-income countries. As such, it is the most substantive effort of its kind to date. Overall, despite some mixed results, the overwhelming balance of evidence suggests that infrastructure improvements are critical in supporting the development process. Studies on digital infrastructure show that firm productivity, employment, and welfare increase with the arrival of broadband internet coverage. In addition, the availability of mobile phones improves coordination between producers and traders and hence reduces the price dispersion of agricultural products. Turning to rural electrification, significant literature documents the positive impact of infrastructure on household welfare, structural transformation, and human capital formation through increased labor force participation, more time spent on education, and increased indoor air quality. Investments in the reliability of power supply also contribute to firms’ productivity. However, studies based on randomized controlled trials have not tended to find a substantial short-term impact in the context of dispersed rural populations. Finally, there is rich literature on various transport infrastructure-to-development linkages, particularly for rural roads and for Sub-Saharan Africa. While households’ income and consumption benefit from the existence of rural roads, highways are also found to contribute to firms’ competitiveness. Similarly, public transportation, railways, and ports have positive impacts on the development process.

Date: 2023-03-06
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