Infrastructure and Economic Growth in East Asia

Stéphane Straub, Charles Vellutini, Michael Warlters
World Bank Research Policy Paper 4589, April 2008

This paper examines whether infrastructure investment has contributed to East Asia's economic growth, using both a growth accounting framework and cross-country regressions. For most of the variables used, both the growth accounting exercise and cross-country regressions fail to find a significant link between infrastructure investment, productivity and growth. These conclusions contrast strongly with previous studies finding positive and significant effects for all infrastructure variables in the context of a production function study. Thus we conclude that results from studies using macro-level data should be treated with extreme caution. The authors suggest that infrastructure investment may have had the primary function of relieving constraints and bottlenecks as they arose, as opposed to directly encouraging growth.