*** Welcome to piglix ***

Infrastructure-based development


Infrastructure-based economic development also called infrastructure-driven development combines key policy characteristics inherited from the Rooseveltian progressivist tradition and Neo-Keynesian economics in the United States, France's Gaullist and Neo-Colbertist centralized economic planning, Scandinavian social democracy as well as Singaporean and Chinese state capitalism : it holds that a substantial proportion of a nation’s resources must be systematically directed towards long term assets such as transportation, energy and social infrastructure (schools, universities, hospitals…) in the name of long term economic efficiency (stimulating growth in economically lagging regions and fostering technological innovation) and social equity (providing free education and affordable healthcare). While the benefits of infrastructure-based development can be debated, the analysis of US economic history shows that at least under some scenarios infrastructure-based investment contributes to economic growth, both nationally and locally, and can be profitable, as measured by a high rate of return. The benefits of infrastructure investment are shown both for old-style economies (ports, highways, railroads) as well as for the new age (airports, telecommunications, internet...).

According to a study by D.A. Aschauer, there is a positive and statistically significant correlation between investment in infrastructure and economic performance. Furthermore, the infrastructure investment not only increases the quality of life, but, based on the time series evidence for the post-World War II period in the United States, infrastructure also has positive impact on both labor and multifactor productivity. The multifactor productivity can be defined as the variable in the output function not directly caused by the inputs, private and public capital. Thus, the impact of infrastructure investment on multifactor productivity is important because the higher multifactor productivity implies higher economic output and hence higher growth.


...
Wikipedia

...