The role of infrastructure efficiency in economic development—The case of underused highways in Europe

José Pedro Pontes; Joana Pais

doi:10.24294/jipd.v2i2.857

The role of infrastructure efficiency in economic development—The case of underused highways in Europe

José Pedro Pontes, Joana Pais

Article ID: 857
Vol 2, Issue 2, 2018

VIEWS - 1807 (Abstract) 432 (PDF)

Abstract

In this paper, we establish a two-way causality between the phenomenon of infrastructure which is underused (the so-called “white elephant case”) and the aggregate productivity level (TFP) of the economy. On the one hand, the fact that a transport infrastructure is not used as much as it could be is itself a cause of low TFP because it represents low productivity for an important item of social capital. On the other hand, low aggregate productivity makes firms’ strategies founded on large scale of production and exports riskier, given the possibility that the political decision to build the required transport infrastructure may never be taken.

Keywords

total factor productivity; efficiency in infrastructure use; economic development; transport economics

Full Text:

PDF

References

Aschauer DA (1989). “Is public expenditure productive?” Journal of Monetary Economics, 23(2): 177–200. doi: 10.1016/0304-3932(89)90047-0.

Barro RJ (1990). “Government spending in a simple model of endogenous growth”. Journal of Political Economy, 98(5 part 2): S103–S125. doi: 10.1086/261726.

Burda MC and Severgnini B (2009). “TFP growth in Old and New Europe”. Comparative Economic Studies, 51(4): 447–466.

Chakraborty S and Dabla-Norris E (2011). “The quality of public investment”. The B.E. Journal of Macroeconomics, 11(1): Article 27. doi: 10.2202/1935-1690.2288.

Corrado C, Haskel J, Jona-Lasinio C, et al. (2018). “Intangible investment in the EU and US before and since the Great Recession and its contribution to productivity growth”. Journal of Infrastructure, Policy and Development, 2(1): 11–36. doi: 10.24294/jipd.v2i1.205.

Daido K and Tabata K (2013). “Public infrastructure, production organization, and economic development”. Journal of Macroeconomics, 38(part B): 330–346. doi: 10.1016/j.jmacro.2013.09.013.

Dal Bó E and Rossi MA (2007). “Corruption and inefficiency: Theory and evidence from electric utilities”. Journal of Public Economics, 91(5–6): 939–962. doi: 10.1016/j.jpubeco.2006.11.005.

Hulten CR (1996). “Infrastructure capital and economic growth: How well you use it may be more important than how much you have”. NBER Working Paper 5847. Cambridge, MA, USA: National Bureau of Economic Research. doi: 10.3386/w5847.

Mankiw NG, Romer D and Weil DN (1992). “A contribution to the empirics of economic growth”. The Quarterly Journal of Economics, 107(2): 407–437. doi: 10.2307/2118477.

Murphy KM, Shleifer A and Vishny RW (1989). “Industrialization and the Big Push”. Journal of Political Economy, 97(5): 1003–1026. doi: 10.1086/261641.

Ndulu BJ (2006). “Infrastructure, regional integration and growth in Sub-Saharan Africa: Dealing with the disadvantages of geography and sovereign fragmentation”. Journal of African Economies, 15 (Supplement 2): 212–244. doi: 10.1093/jae/ejl033.

Reinikka R and Svensson J (2002). “Coping with poor public capital”. Journal of Development Economics, 69(1): 51–69. doi: 10.1016/S0304-3878(02)00052-4.

Rioja FK (2003). “The penalties of inefficient infrastructure”. Review of Development Economics, 7(1): 127–137. doi: 10.1111/1467-9361.00180.

Rosenstein-Rodan PN (1943). “Problems in industrialisation of Eastern and South-Eastern Europe”. The Economic Journal, 53(210/211): 202–211. doi: 10.2307/2226317.

Solow RM (1957). “Technical change and the aggregate production function”. The Review of Economics and Statistics, 39(3): 312–320. doi: 10.2307/1926047.

Yee, WH and Li H (2018). “Unpacking the ‘political-institutional complex’: The role of physical and institutional infrastructures in Indonesia’s decentralization reform”. Journal of Infrastructure, Policy and Development, 2(1): 174–192.doi: 10.24294/jipd.v2i1.158.

DOI: https://doi.org/10.24294/jipd.v2i2.857