The Effects of Infrastructure Development on Growth and Income Distribution

The Effects of Infrastructure Development on Growth and Income Distribution

| César Calderón and Luis Servén
This paper evaluates the impact of infrastructure development on economic growth and income distribution using a large panel dataset of over 100 countries from 1960 to 2000. The study estimates equations for GDP growth and inequality measures, incorporating infrastructure quantity and quality indicators alongside standard controls. To address potential endogeneity, GMM estimators with internal and external instruments are used. The results show that infrastructure stock positively affects growth, while higher infrastructure quantity and quality reduce income inequality. Specification tests suggest these results capture the causal impact of infrastructure on growth and inequality. The findings indicate that infrastructure development can effectively combat poverty. Simulations for Latin American countries show significant growth and inequality reduction from improved infrastructure availability and quality. The paper also discusses the distributive impact of infrastructure, showing that it can reduce inequality by improving access for the poor. It highlights the importance of infrastructure quality and access for economic growth and inequality reduction. The study uses synthetic indices for infrastructure quantity and quality, and finds that infrastructure quality has a smaller effect on growth than quantity. The results suggest that infrastructure development is crucial for long-term growth and reducing inequality. The paper concludes that infrastructure development can significantly enhance growth and reduce inequality, particularly in developing countries.This paper evaluates the impact of infrastructure development on economic growth and income distribution using a large panel dataset of over 100 countries from 1960 to 2000. The study estimates equations for GDP growth and inequality measures, incorporating infrastructure quantity and quality indicators alongside standard controls. To address potential endogeneity, GMM estimators with internal and external instruments are used. The results show that infrastructure stock positively affects growth, while higher infrastructure quantity and quality reduce income inequality. Specification tests suggest these results capture the causal impact of infrastructure on growth and inequality. The findings indicate that infrastructure development can effectively combat poverty. Simulations for Latin American countries show significant growth and inequality reduction from improved infrastructure availability and quality. The paper also discusses the distributive impact of infrastructure, showing that it can reduce inequality by improving access for the poor. It highlights the importance of infrastructure quality and access for economic growth and inequality reduction. The study uses synthetic indices for infrastructure quantity and quality, and finds that infrastructure quality has a smaller effect on growth than quantity. The results suggest that infrastructure development is crucial for long-term growth and reducing inequality. The paper concludes that infrastructure development can significantly enhance growth and reduce inequality, particularly in developing countries.
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Understanding The Effects of Infrastructure Development on Growth and Income Distribution