Infrastructure and economic growth: Evidence from the United States

Prince Fosu, Martinson Ankrah Twumasi

Article ID: 1419
Vol 6, Issue 1, 2022

VIEWS - 1358 (Abstract) 867 (PDF)


Developing countries have witnessed a rise in infrastructure spending over the past decades; however, infrastructure spending in most developed countries, particularly the US, continues to decline. As a result, in 2021, the US Congress passed a Bipartisan Infrastructure Bill, which invests $1 trillion in the country’s infrastructure every year. Using the principal component analysis and VAR estimation, we analyzed the impact of infrastructure (transportation and water, railway networks, aviation, energy, and fixed telephone lines) on economic growth in the US. Our findings show that infrastructure spending positively and significantly impacted economic growth. Additionally, the impulse response analysis shows that shocks to infrastructure spending had positive and persistent effects on economic growth. Our results suggest that infrastructure investment spurs economic growth. Based on our findings, sustained public spending on transport and water, railway networks, aviation, energy, and fixed telephone lines infrastructure by the US government will positively impact economic growth in the country. The study also suggests that policies that promote infrastructure spending, such as the Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act) passed by the US Congress, should be enhanced to boost economic growth in the US. 


economic growth; infrastructure; vector autoregression; United States

Full Text:



Alesina A and Perotti R (1996). “Income distribution, political instability, and investment”. European Economic Review, 40(6): 1203–1228.

Aschauer DA (1989). “Is public expenditure productive?” Journal of Monetary Economics, 23(2): 177–200.

American Society of Civil Engineers (2021). Failure to Act: Closing the Infrastructure Gap for America’s Economics Future. American Society of Civil Engineers.

Banerjee A, Duflo E and Qian N (2020). “On the road: Access to transportation infrastructure and economic growth in China”. Journal of Development Economics, 145: Art. 102442.

Bils M and Klenow PJ (2000). “Does schooling cause growth?” American Economic Review, 90(5): 1160–1183.

Boopen S (2006). “Transport infrastructure and economic growth: Evidence from Africa using dynamic panel estimates”. The Empirical Economics Letters, 5(1): 37–52.

Business Roundtable (2015). Road to Growth: The Case for Investing in America’s Transportation Infrastructure. Business Roundtable.

Canning D and Pedroni P (2004). The Effect of Infrastructure on Long-Run Economic Growth (Department of Economics Working Papers 2004-04). Department of Economics, Williams College.

Calderón C (2009). Infrastructure and Growth in Africa (Policy Research Working Paper 4914). World Bank.

Calderón C and Servén L (2004). The Effects of Infrastructure Development on Growth and Income Distribution (Policy Research Working Paper 3400). World Bank.

Congressional Budget Office (2020). Public Spending on Transportation and Water Infrastructure, 1956 to 2017. Congressional Budget Office.

Congressional Budget Office (2021). The State of U.S. Infrastructure. Congressional Budget Office, New York, United States.

Cronin FJ, Parker EB, Colleran EK and Gold MA (1991). “Telecommunications infrastructure and economic

growth: An analysis of causality”. Telecommunications Policy, 15(6): 529–535.

Czernich N, Falck O, Kretschmer T and Woessmann L (2011). “Broadband infrastructure and economic growth”. The Economic Journal, 121(552): 505–532.

Devadas S and Pennings S (2019). “Assessing the effect of public capital on growth: An extension of the World Bank Long-Term Growth Model”. Journal of Infrastructure, Policy and Development, 3(1): 22–55.

Donaldson D and Hornbeck R (2016). “Railroads and American economic growth: A ‘market access’ approach”. The Quarterly Journal of Economics, 131(2): 799–858.

Esfahani HS and Ramı́rez MT (2003). “Institutions, infrastructure, and economic growth”. Journal of Development Economics, 70(2): 443–477.

Fosu P (2019). The Determinants of Economic Growth: The Role of Infrastructure (MPRA Paper No. 93101). Munich Personal RePEc Archive.

Fosu P (2021). “Does railway lines investments matter for economic growth?” ECONOMICS-Innovative and Economic Research, 9(1): 11–24.

Fosu P and Twumasi MA (2022). “The impact of transportation and water infrastructure spending source on economic growth: Evidence from U.S. state and local and federal government”. International Journal of Contemporary Economics and Administrative Sciences, 12(1): 075–092.

Garcia-Milà T, McGuire TJ and Porter RH (1996). “The effect of public capital in state-level production functions reconsidered”. The Review of Economics and Statistics, 78(1): 177–180.

Hanushek EA and Kimko DD (1995). “Schooling, labor force quality, and economic growth”. American Economic Review, 90(5): 1184–1208.

Holtz-Eakin D and Schwartz AE (1995). “Spatial productivity spillovers from public infrastructure: Evidence from state highways”. International Tax and Public Finance, 2(3): 459–468.

Meersman H and Nazemzadeh M (2017). “The contribution of transport infrastructure to economic activity: The case of Belgium”. Case Studies on Transport Policy, 5(2): 316–324.

Nadiri MI and Mamuneas TP (1991). The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of US Manufacturing Industries (No. w3887). National Bureau of Economic Research.

Petroski H (2016). The Road Taken: The History and Future of America’s Infrastructure. Bloomsbury.

Pradhan RP and Bagchi TP (2013). “Effect of transportation infrastructure on economic growth in India: The VECM approach”. Research in Transportation Economics, 38(1): 139–148.

Sahoo P and Dash RK (2009). “Infrastructure development and economic growth in India”. Journal of the Asia Pacific Economy, 14(4): 351–365.

Sanchez‐Robles B (1998). “Infrastructure investment and growth: Some empirical evidence”. Contemporary Economic Policy, 16(1): 98–108.

Santiago R, Koengkan M, Fuinhas JA and Marques AC (2020). “The relationship between public capital stock, private capital stock and economic growth in the Latin American and Caribbean countries”. International Review of Economics, 67(3): 293–317.

Sridhar KS and Sridhar V (2007). “Telecommunications infrastructure and economic growth: Evidence from developing countries”. Applied Econometrics and International Development, 7(2).

Straub S, Vellutini C and Warlters M (2008). Infrastructure and Economic Growth in East Asia (Policy Research Working Paper 4589). World Bank.

The White House (2021). President Biden’s Bipartisan Infrastructure Law. The White House.

World Economic Forum (2016). Global Infrastructure Gap. World Economic Forum.

World Bank (2020). Data Bank—World Development Indicators. World Bank.

Yoshino N and Abidhadjaev U (2017). “Impact of infrastructure on tax revenue: Case study of high-speed train in Japan”. Journal of Infrastructure, Policy and Development, 1(2): 129–148.

Zeng S, Cambronero A and Yuan H (2017). Tutorial Principal Component Analysis and Regression: STATA, R and Python. Github.

Zhou A (2022). “Digital infrastructure and economic growth—Evidence for China”. Journal of Infrastructure, Policy and Development, 6(1): Art. 1397.



  • There are currently no refbacks.

Copyright (c) 2022 Prince Fosu, Martinson Ankrah Twumasi

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

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