How Much Does Physical Infrastructure Contribute to Economic Growth ? An Empirical Analysis

Existing literature on the relationship between infrastructure and economic growth isinconclusive. This study evaluates the contributions to economic growth of three main categories ofinfrastructure—transport, electricity, and telecommunications—using data from 87 countries over1992–2017. Compared with existing studies, this study uses more recent data, includes new types of infrastructure suchas mobile phones, and provides separate estimates for developing and developed countries. The pooled mean groupestimator, which tests for the weak exogeneity of the infrastructure variables, is employed. The key finding ofthe study is that an increase in infrastructure, especially electricity generation capacity and telecommunications, hassignificant positive effects on gross domestic product. Infrastructure has a larger effect in more recent years(1992–2017) than in earlier years (1970–1991), and the effects of infrastructure are higher in developing economiesthan in industrialized economies.