Infrastructure, value chains, and economic upgrades

Xubei Luo, Xuejiao Xu

Abstract


Infrastructure development is critical to delivering growth, reducing poverty and addressing broader development goals, as argued in the World Bank Report Transformation through Infrastructure (2012). This paper surveys the literature of the linkages between infrastructure investment and economic growth, discusses the role of infrastructure in the participation of global value chains and in supporting economic upgrades, highlights the challenges faced the least developed countries and provides policy recommendations. It suggests that addressing the bottlenecks in infrastructure is a necessary condition to provide a window of opportunity for an economy to develop following its comparative advantage. With the right conditions, good infrastructure can support an economy, particularly a less developed economy, to reap the benefit through the participation in the global value chains to upgrade the economic structure.


Keywords


Infrastructure gap; economic growth; structural upgrades; least developed countries; global value chains

Full Text:

PDF

References


AfDB, OECD and UNDP, 2014, African Economic Outlook 2014: Global Value Chains and Africa's Industrialisation, OECD Publishing, Paris.

Ahmed S, Ghani E and Kelegama S, 2010, Promoting Economic Cooperation in South Asia: beyond South Asian Preferential Trade Agreement (SAFTA), World Bank, Washington, DC.

Albiman MM and Sulong Z, 2016, The role of ICT use to the economic growth in Sub Saharan African region (SSA), Journal of Science and Technology Policy Management, vol.7(3): 306-329.

Alesina A, Baqir R and Easterly W, 1999, Public goods and ethnic divisions, The Quarterly Journal of Economics, vol.114(4): 1243-1284.

Aschauer DA, 1989, Is public expenditure productive? Journal of monetary economics, vol.23(2): 177-200.

Arrow KJ and Kruz M, 1970, Public investment, The rate of return and optimal fiscal policy, The Johns Hopkins University Press, Baltimore.

Baldwin R, 2011, Trade and industrialisation after globalisation's 2nd unbundling: How building and joining a supply chain are different and why it matters, National Bureau of Economic Research, viewed 28 March 2018,

Bamber P and Gereffi G, 2013, Costa Rica in the aerospace global value chain: Opportunities for entry and upgrading, Center on Globalization, Governance and Competitiveness, Duke University, Durham, NC.

Barro RJ, 1990, Government spending in a simple model of endogeneous growth, Journal of political economy, vol.98(5, Part 2): S103-S125.

Bottini N, Coelho M and Kao J, 2012, Infrastructure and growth, background research papers for the growth commission report, December, viewed 28 March 2018,

Calderón C, Moral-Benito E and Servén L, 2015, Is infrastructure capital productive? A dynamic heterogeneous approach. Journal of Applied Econometrics, vol.30(2): 177-198.

Calderón C and Servén L, 2008, Infrastructure and economic development in Sub-Saharan Africa, World Bank Policy Research Working Paper No. 4721, viewed 28 March 2018, < http://documents.worldbank.org/curated/en/393241468180903623/pdf/WPS4712.pdf>

Calderón C and Servén L, 2014, Infrastructure, growth, and inequality: An overview, World Bank Policy Research Working Paper No. 7034, viewed 28 March 2018, < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2497234>

Canning D and Bennathan E, 2000, The social rate of return on infrastructure investments, World Bank Policy Research Working Paper No. 2390, viewed 28 March 2018, < https://openknowledge.worldbank.org/bitstream/handle/10986/19820/multi_page.pdf?sequence=1>

Canning D and Pedroni P, 2008, Infrastructure, long-run economic growth and causality tests for cointegrated panels. The Manchester School, vol.76(5): 504-527.

Christ N and Ferrantino MJ, 2011, Land transport for export: The effects of cost, time, and uncertainty in sub-Saharan Africa. World Development, vol.39(10): 1749-1759.

Cordella A and Simon KA, 1997, The impact of information technology on transaction and coordination cost, Conference on Information Systems Research, Scandinavia.

Dam KW, 2007, The law-growth nexus: The rule of law and economic development. Brookings Institution Press.

De la Fuente Á, 2010, Infrastructures and productivity: An updated survey, Universitat Autònoma de Barcelona, Departament d'Economia i d'Història Econòmica, Unitat Fonaments de l'Anàlisi Econòmica.

Del Prete D, Giovannetti G and Marvasi E, 2017, Global value chains: New evidence for North Africa. International Economics.

Diakantoni A, Escaith H, Roberts M, et al. 2017, Accumulating trade costs and competitiveness in global value chains, WTO Working Paper ERSD-2017-02, viewed 28 March 2018, < https://www.econstor.eu/bitstream/10419/152255/1/879218398.pdf>

Dollar D, Hallward-Driemeier M and Mengistae T, 2005, Investment climate and firm performance in developing economies, Economic Development and Cultural Change, vol.54(1): 1-31.

Duggal VG, Saltzman C and Klein LR, 1999, Infrastructure and productivity: A nonlinear approach, Journal of econometrics, vol.92(1): 47-74.

Eden M and Kraay A, 2014, 'Crowding in' and the returns to government investment in low-income countries, World Bank Policy Research Working Papers No. 6781, viewed 28 March 2018, < https://openknowledge.worldbank.org/bitstream/handle/10986/17337/WPS6781.pdf?sequence=1>

Estache A, Manacorda M, Valletti TM, et al. 2002, Telecommunications reform, access regulation, and Internet adoption in Latin America [with comments], Economia, vol.2(2): 153-217.

Fay M, Toman M, Benitez D, et al. 2011, Infrastructure and sustainable development, Postcrisis Growth and Development: A Development Agenda for the G-20, 329-382.

Fernald JG, 1999, Roads to prosperity? Assessing the link between public capital and productivity, American Economic Review, 619-638.

Florida R, 2005, The world is spiky, The Atlantic Monthly, vol.296(3): 48–51.

Fujita M, Krugman PR and Venables AJ, 1999, The spatial economy: Cities, regions and international trade (vol. 213), Cambridge, MA: MIT press.

Fujita M and Thisse JF, 2013, Economics of agglomeration: Cities, industrial location, and globalization, Cambridge university press.

Futagami K, Morita Y and Shibata A, 1993, Dynamic analysis of an endogenous growth model with public capital, The Scandinavian Journal of Economics, 607-625.

Gereffi G, 2015, Global value chains, development and emerging economies, UNU-MERIT Working Papers, viewed 28 March 2018, < https://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/10990/2015-11-27_Gereffi%2c%20Gary_GVCs%2c%20development%20%26%20emerging%20economies_UNU-MERIT%20wp2015-047.pdf?sequence=1&isAllowed=y>

Gereffi G and Fernandez-Stark K, 2016, Global value chain analysis: A primer, 2nd edition, Duke CGGC (Center on Globalization, Governance & Competitiveness).

Gereffi G and Luo X, 2015, Risks and opportunities of participation in global value chains, Journal of Banking and Financial Economics, vol.2, Issue 4: 51-63.

Gonzalez JL, 2016, Using foreign factors to enhance domestic export performance, OECD Trade Policy Papers No. 191, viewed 28 March 2018, < https://www.researchgate.net/profile/Javier_Lopez-Gonzalez/publication/309292137_Using_Foreign_Factors_to_Enhance_Domestic_Export_Performance_A_Focus_on_Southeast_Asia/links/5808884408ae5ed04bfe8a4c/Using-Foreign-Factors-to-Enhance-Domestic-Export-Performance-A-Focus-on-Southeast-Asia.pdf>

Hallaert JJ, Cavazos-Cepeda RH and Kang G, 2011, Estimating the constraints to trade of developing countries, OECD Trade Policy Working Paper No. 116, viewed 28 March 2018, < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1874738>

Huang Y, 2017, Cracking the China conundrum: Why conventional economic wisdom is wrong, Oxford University Press.

Hurlin C, 2006, Network effects of the productivity of infrastructure in developing countries, World Bank Policy Research Working Paper No. 3808, viewed 28 March 2018, < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=875642>

International Monetary Fund (IMF), 2015, Regional Economic Outlook: Sub-Saharan Africa, International Monetary Fund, Washington, DC.

Ismail NW and Mahyideen JM, 2015, The Impact of infrastructure on trade and economic growth in selected economies in Asia, ADBI Working Paper 553, viewed 28 March 2018, < https://www.econstor.eu/bitstream/10419/145401/1/84507122X.pdf>

Kee H and Tang H, 2015, Domestic value added in exports: Theory and firm evidence from China, Policy Research Working Paper No. 7491, viewed 28 March 2018, < https://www.econstor.eu/bitstream/10419/123254/1/cesifo_wp5614.pdf>

Kowalski P, Gonzalez JL, Ragoussis A, et al. 2015, Participation of Developing Countries in Global Value Chains, OECD Trade Policy Papers, No. 179, viewed 28 March 2018, < https://www.researchgate.net/profile/Javier_Lopez-Gonzalez/publication/280067616_Participation_of_Developing_Countries_in_Global_Value_Chains_Implications_for_Trade_and_Trade-Related_Policies/links/56a8888f08ae997e22bd57ff/Participation-of-Developing-Countries-in-Global-Value-Chains-Implications-for-Trade-and-Trade-Related-Policies.pdf>

Kummritz V, Taglioni D and Winkler D, 2017, Economic upgrading through global value chain participation, Policy Research Working Paper No. 8007, viewed 28 March 2018, < https://openknowledge.worldbank.org/bitstream/handle/10986/26348/WPS8007.pdf?sequence=1>

Lakshmanan TR, 2011, The broader economic consequences of transport infrastructure investments, Journal of transport geography, vol.19(1): 1-12.

Lewis D and Bloch R, 1998, SDIs: Infrastructure, agglomeration and the region in industrial policy, Development Southern Africa, vol.15(5): 727-755.

Limao N and Venables AJ, 2001, Infrastructure, geographical disadvantage, transport costs, and trade, The World Bank Economic Review, vol.15(3): 451-479.

Lin JY and Monga C, 2011, Growth identification and facilitation: The role of the State in the dynamics of structural change, World Bank Policy Research Working Paper No. 5313, viewed 28 March 2018,

Lin JY, 2011, New structural economics: A framework for rethinking development, The World Bank Research Observer, vol.26(2): 193-221.

Lin, J. Y. (2012a), From flying geese to leading dragons: New opportunities and strategies for structural transformation in developing countries, Global Policy, vol.3(4): 397-409.

Lin, J. Y. (2012b). The Quest for Prosperity: How Developing Economies Can Take Off. Princeton University Press, Princeton, NJ.

McCann P and Shefer D, 2004, Location, agglomeration and infrastructure, Papers in regional science, vol.83(1): 177-196.

Moïsé E and Sorescu S, 2013, Trade facilitation indicators: The potential impact of trade facilitation on developing countries' trade, OECD Trade Policy Papers, No. 144, viewed 28 March 2018, < https://ideas.repec.org/p/oec/traaab/144-en.html>

Newbery D, 2012, Energy and infrastructure, LSE Growth Commission, viewed 28 March 2018,

OECD and WTO, 2013, Aid for Trade at a Glance 2013: Connecting to Value Chains, WTO, Geneva/OECD Publishing, Paris.

OECD, WTO and World Bank Group, 2014, Global Value Chains: Challenges, Opportunities, and Implications for Policy, Report prepared for submission to the G20 Trade Ministers Meeting, Sydney, Australia, viewed 28 March 2018,

Radelet S and Sachs J, 1998, Shipping costs, manufactured exports, and economic growth, American Economic Association Meetings, Harvard University, viewed 28 March 2018, < http://lnweb90.worldbank.org/eca/transport.nsf/3b8b3d27260832ec852569fa0059675f/bae7ab18a78a8ba985256b040057e4fa/$FILE/shipcost.pdf>

Richaud C, Sekkat K and Varoudakis A, 1999, Infrastructure and growth spillovers: A case for a regional infrastructure policy in Africa, Manuscript, University of Brussels, viewed 28 March 2018, < https://www.researchgate.net/profile/Aristomene_Varoudakis/publication/2584031_Infrastructure_and_Growth_Spillovers_A_Case_for_a_Regional_Infrastructure_Policy_in_Africa/links/09e4150ec58ffdce2e000000.pdf>

Röller LH and Waverman L, 2001, Telecommunications infrastructure and economic development: A simultaneous approach, American economic review, 909-923.

Rungi A and Del Prete D, 2017, The “smile curve”: where value is added along supply chains, EIC working paper series, viewed 28 March 2018, < http://eprints.imtlucca.it/3663/1/EIC_WP_5_2017.pdf>

Seethepalli K, Bramati MC and Veredas D, 2008, How relevant is infrastructure to growth in East Asia? World Bank Policy Research Working Paper No. 4597, viewed 28 March 2018, < http://documents.worldbank.org/curated/en/845081468234277536/pdf/wps4597.pdf>

Straub S and Terada-Hagiwara A, 2010, Infrastructure and growth in developing Asia, Asian Development Bank Economics Working Paper Series No. 231, viewed 28 March 2018,

Straube F, Handfield R, Pfohl HC, et al. 2013, Trends und strategien in logistik und supply chain management, Deutscher Verkehrs-Verlag, Hamburg, Germany.

Teravaninthorn S and Raballand G, 2009, Transport Prices and Costs in Africa: A Review of the International Corridors, World Bank, Washington, DC.

Wan G and Zhang Y, 2017, The direct and indirect effects of infrastructure on firm productivity: Evidence from manufacturing in the People's Republic of China, ADBI Working Paper Series No. 714, viewed 28 March 2018, < https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?referer=https://scholar.google.com/&httpsredir=1&article=1561&context=intl>

Weinberger K and Lumpkin TA, 2007, Diversification into horticulture and poverty reduction: A research agenda, World Development, vol.35(8): 1464-1480.

Wheeler D and Mody A, 1992, International investment location decisions: The case of US firms, Journal of international economics, vol.33(1-2): 57-76.

World Bank, 2012a, Transformation through Infrastructure, World Bank, Washington, DC.

World Bank, 2012b, De-fragmenting Africa: Deepening Regional Trade Integration in Goods and Services, World Bank, Washington, DC.

World Bank, 2017, Africa's Pulse, World Bank, Washington, DC.

World Bank, WTO, OECD, et al. 2017, Global Value Chain Development Report 2017: Measuring and Analyzing the Impact of GVCs on Economic Development, World Bank, Washington, DC.

World Economic Forum (WEF), 2013, Enabling Trade: Valuing growth opportunities, World Economic Forum, Geneva, Switzerland.

World Economic Forum (WEF), 2014, The Global Competitiveness Report 2014–2015, World Economic Forum, Geneva, Switzerland.

WTO and IDE-JETRO, 2011, Trade patterns and global value chains in East Asia: From Trade in Goods to Trade in Tasks, World Trade Organization, Geneva, Switzerland.

Wylie PJ, 1996, Infrastructure and Canadian economic growth 1946-1991, The Canadian Journal of Economics/Revue canadienne d'Economique, vol.29: S350-S355.

Yi KM, 2003, Can vertical specialization explain the growth of world trade? Journal of political Economy, vol.111(1), 52-102.




DOI: http://dx.doi.org/10.24294/jipd.v2i2.691

Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 Xubei Luo, Xuejiao Xu

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Creative Commons License
This site is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.