Infrastructure Investment: Links to Growth and the Role of Public Policies

Investment in network infrastructure – the energy, water, transport and telecommunication networks – which performs a vital role for the functioning of the economy, can contribute to raising growth and social welfare. But more is not always better. While the paper shows that investment in the network industries has had a positive effect over and above the addition to the capital stock, there is evidence that investment in the past has sometimes been misallocated. This paper identifies the policy framework that promotes investment that is conducive to growth and ensures the appropriate use of infrastructure. Central aspects of this framework are identified as a robust decision making process, improving the selection of investment projects, the introduction of competitive pressures through the reduction of barriers to entry and vertical separation when this is appropriate. In addition, efficient investment can be promoted by the combination of regulator independence and the application of incentive regulation. L'investissement dans les reseaux d'infrastructure : Liens a la croissance et le role des politiques L’investissement dans les reseaux d’infrastructure, l’energie, l’eau, le transport et les telecommunications jouant un role vital pour le bon fonctionnement de l’economie, peut egalement contribuer a la croissance economique et au bien-etre social. Neanmoins, plus d’investissement n’est pas toujours benefique. Nous montrons que l’investissement d’infrastructure a bien eu des effets positifs allant au-dela de celui de l’accumulation du stock du capital, mais qu’il existe parfois des signes de mauvaise allocation de l’investissement dans le passe. Cette etude identifie le cadre de politique economique qui encourage l’investissement favorable a la croissance economique et conduit a un bon usage des reseaux d’infrastructure. Les elements centraux de ce cadre sont : un processus de prise de decision robuste, une amelioration de la selection des projets d’investissement, l’introduction de pressions competitives par le biais d’une baisse des barrieres a l’entree et de l’integration verticale si necessaire. De plus, l’efficacite de l’investissement peut etre augmentee en combinant independance du regulateur et regulation incitative.

[1]  Rien Wagenvoort,et al.  Infrastructure Finance in Europe: Composition, Evolution and Crisis Impact , 2011 .

[2]  Alexander Galetovic,et al.  The economic or infrastructure finance: Public-Private Partnership versus public provision. , 2010 .

[3]  Axel Buchner,et al.  Risk, Return and Cash Flow Characteristics of Infrastructure Fund Investments , 2010 .

[4]  Georg Inderst.  Infrastructure as an Asset Class , 2010 .

[5]  D. Sutherland,et al.  Public-Private Partnerships and Investment in Infrastructure , 2010 .

[6]  P. Conway,et al.  Long-Term Growth and Policy Challenges in the Large Emerging Economies , 2010 .

[7]  T. Thomas,et al.  Review of public investment management performance (PIMP) in an economic crisis , 2009 .

[8]  Balázs Égert,et al.  Infrastructure and Growth: Empirical Evidence , 2009, SSRN Electronic Journal.

[9]  David Haugh,et al.  Maximising Mexico's Gains from Integration in the World Economy , 2008 .

[10]  Christian von Hirschhausen,et al.  Infrastructure, regulation, investment and security of supply: A case study of the restructured US natural gas market , 2008 .

[11]  E. Maskin,et al.  Public-Private Partnerships and Government Spending Limits , 2008 .

[12]  Cornelius Bähr.  How Does Sub-National Autonomy Affect the Effectiveness of Structural Funds? , 2008 .

[13]  Meghan R. Busse,et al.  Principal-Agent Incentives, Excess Caution, and Market Inefficiency: Evidence from Utility Regulation , 2007 .

[14]  D. Bruce,et al.  Road to Ruin? A Spatial Analysis of State Highway Spending , 2007 .

[15]  Y. Spiegel,et al.  Capital Structure and Regulation: Does Ownership Matter? , 2007 .

[16]  K. Morrow,et al.  An overview of the EU KLEMS Growth and Productivity Accounts , 2007 .

[17]  G. Nicoletti,et al.  Product Market Competition in the OECD Countries: Taking Stock and Moving Forward , 2007 .

[18]  Severin Borenstein,et al.  How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry , 2007 .

[19]  J. Barea,et al.  The New Model of the Railway Industry in Spain within the European Framework , 2007 .

[20]  Theofanis P. Mamuneas,et al.  Irreversible Investment, Capital Costs and Productivity Growth: Implications for Telecommunications , 2007 .

[21]  María de Jesús Delgado,et al.  Network infrastructure spillover in private productive sectors: evidence from Spanish high capacity roads , 2007 .

[22]  Fatih Özatay.  Public sector price controls and electoral cycles , 2007 .

[23]  Productivity Commission.  Potential Benefits of the National Reform Agenda , 2007 .

[24]  Paul Conway,et al.  Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights , 2006 .

[25]  D. Starkie.  Investment incentives and airport regulation , 2006 .

[26]  Rod Eddington,et al.  The Eddington Transport Study: Main Report - Transport's Role in Sustaining the UK's Productivity and Competitiveness , 2006 .

[27]  C. Winston,et al.  The Effect of Government Highway Spending on Road Users' Congestion Costs , 2006 .

[28]  R. Moita,et al.  Political Price Cycles in Regulated Industries: Theory and Evidence , 2006, SSRN Electronic Journal.

[29]  Stéphane Saussier,et al.  Public-Private Partnerships and Prices: Evidence from Water Distribution in France , 2006 .

[30]  A. Galetovic,et al.  Renegotiation Without Holdup: Anticipating Spending and Infrastructure Concessions , 2006 .

[31]  P. Joskow.  Competitive Electricity Markets and Investment in New Generating Capacity , 2006 .

[32]  Martin Cave,et al.  Encouraging infrastructure competition via the ladder of investment , 2006 .

[33]  Christophe Hurlin.  Network Effects of the Productivity of Infrastructure in Developing Countries , 2005 .

[34]  G. Guthrie.  Regulating Infrastructure: The Impact on Risk and Investment , 2005 .

[35]  Albert Solé-Ollé,et al.  The regional allocation of infrastructure investment: The role of equity, efficiency and political factors , 2005 .

[36]  R. Monteiro.  Public-private partnerships: some lessons from Portugal , 2005 .

[37]  R. Pindyck.  Pricing Capital Under Mandatory Unbundling and Facilities Sharing , 2005 .

[38]  D. Sappington.  Regulating Service Quality: A Survey , 2005 .

[39]  D. Newbery.  Road User and Congestion Charges , 2005 .

[40]  Oecd Competition Division.  The OECD holds a roundtable on structural reform in the rail industry , 2005 .

[41]  L. Serven,et al.  Trends in Infrastructure in Latin America, 1980-2001 , 2004 .

[42]  I. Dobbs,et al.  Intertemporal Price Cap Regulation Under Uncertainty , 2004 .

[43]  Warwick Lightfoot,et al.  The sources of economic growth in OECD countries , 2004 .

[44]  F. Giavazzi,et al.  Improving the Sgp Through a Proper Accounting of Public Investment , 2004 .

[45]  D. Newbery,et al.  Privatising Network Industries , 2004, SSRN Electronic Journal.

[46]  Oecd Competition Division.  The OECD holds a roundtable on competition and regulation in the water sector , 2004 .

[47]  Catherine J. Morrison Paul,et al.  Airport infrastructure spillovers in a network system , 2003 .

[48]  Panicos O. Demetriades,et al.  International Aspects of Public Infrastructure Investment , 2003 .

[49]  Alexander L. Wolman,et al.  Boom and Bust in Telecommunications , 2003 .

[50]  Ingo Vogelsang,et al.  Price Regulation of Access to Telecommunications Networks , 2003 .

[51]  Sam Paltridge,et al.  After the Telecommunications Bubble , 2003 .

[52]  Hal J. Singer,et al.  Do Unbundling Policies Discourage Clec Facilities-Based Investment? , 2003 .

[53]  Stefano Scarpetta,et al.  Regulation, Productivity and Growth: OECD Evidence , 2003 .

[54]  Stephen P. King,et al.  Access Holidays and the Timing of Infrastructure Investment , 2002 .

[55]  Henri L. F. de Groot,et al.  Fertile Soil for Structural Funds? A Panel Data Analysis of the Conditional Effectiveness of European Cohesion Policy , 2002 .

[56]  O. Hart.  Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships , 2002 .

[57]  William L. Megginson,et al.  Privatization and the sources of performance improvement in the global telecommunications industry , 2002 .

[58]  Olivier Cadot,et al.  Contribution to Productivity or Pork Barrel? : The Two Faces of Infrastructure Investment , 2002 .

[59]  P. Klemperer.  How (Not) to Run Auctions: The European 3g Telecom Auctions , 2001 .

[60]  L. Röller,et al.  Telecommunications Infrastructure and Economic Development: a Simultaneous Approach Forschungsschwerpunkt Marktprozeß Und Unter- Nehmensentwicklung Research Area Market Processes and Corporate Development Abstract Telecommunications Infrastructure and Economic Development: a Simultaneous Approach * , 1996 .

[61]  D. Newbery,et al.  INVESTMENT, REPROCUREMENT AND FRANCHISE CONTRACT LENGTH IN THE BRITISH RAILWAY INDUSTRY* , 2000 .

[62]  G. Nicoletti,et al.  The Implementation and the Effects of Regulatory Reform: Past Experience and Current Issues , 2000 .

[63]  X. Sala-i-Martin,et al.  Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach , 2000 .

[64]  Panicos O. Demetriades,et al.  Infrastructure, specialization, and economic growth , 2000 .

[65]  D. Newbery.  Privatization, Restructuring, and Regulation of Network Utilities , 2000 .

[66]  M. Marcellino,et al.  Public Capital and Economic Performance: Evidence from Italy , 2000 .

[67]  P. Schreyer.  The Contribution of Information and Communication Technology to Output Growth: A Study of the G7 Countries , 2000 .

[68]  J. Laffont,et al.  Competition in telecommunications , 1999 .

[69]  M. Klein.  Bidding for concessions : the impact of contract design , 1998 .

[70]  Joshua S. Gans,et al.  Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities , 1998 .

[71]  E. Auriol.  Deregulation and Quality , 1998 .

[72]  P. Grout.  The Economics of the Private Finance Initiative , 1997 .

[73]  S. Borenstein,et al.  The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry , 1997 .

[74]  Ricardo J. Caballero,et al.  Aggregate Investment , 1997 .

[75]  John G. Fernald,et al.  Roads to Prosperity?: Assessing the Link Between Public Capital and Productivity , 1997 .

[76]  Timothy Irwin,et al.  Price caps, rate-of-return regulation, and the cost of capital , 1997 .

[77]  I. Mayeres,et al.  Optimal Tax and Public Investment Rules for Congestion Type of Externalities , 1997 .

[78]  Daniel F. Spulber,et al.  The Tragedy of the Telecommons: Government Pricing of Unbundled Network Elements Under the Telecommunications Act of 1996 , 1997 .

[79]  Dennis L. Weisman,et al.  The effects of incentive regulation in the telecommunications industry: A survey , 1996 .

[80]  N. Economides,et al.  Access and Interconnection Pricing: How Efficient is the “Efficient Component Pricing Rule”? , 1995 .

[81]  N. Economides,et al.  Access and Interconnection Pricing: How Efficient is the "Efficient Component Pricing Rule"? , 1995 .

[82]  Mark W. Watson,et al.  A SIMPLE ESTIMATOR OF COINTEGRATING VECTORS IN HIGHER ORDER INTEGRATED SYSTEMS , 1993 .

[83]  D. Weil,et al.  A Contribution to the Empirics of Economic Growth , 1992 .

[84]  Clifford Winston,et al.  EFFICIENT TRANSPORTATION INFRASTRUCTURE POLICY , 1991 .

[85]  Y Zhang,et al.  Airport pricing: Congestion tolls, lumpy investment, and cost recovery , 1990 .

[86]  R. Pindyck.  Irreversibility, Uncertainty, and Investment , 1990 .

[87]  David Alan Aschauer,et al.  IS PUBLIC EXPENDITURE PRODUCTIVE , 1989 .

[88]  C. Granger,et al.  Co-integration and error correction: representation, estimation and testing , 1987 .

[89]  M. King.  A Pigovian Rule for the Optimum Provision of Public Goods , 1985 .

[90]  W. Nordhaus.  The Political Business Cycle , 1975 .

[91]  Paul L. Joskow,et al.  Inflation and Environmental Concern: Structural Change in the Process of Public Utility Price Regulation , 1974, The Journal of Law and Economics.

[92]  H. Demsetz.  Do Competition and Monopolistic Competition Differ? , 1968, Journal of Political Economy.

[93]  J. Nilsson.  Transport Infrastructure Investment : Options for Efficiency , 2008 .

[94]  S. Proost,et al.  Subsidiarity and Transport Policy in Europe: What EU-Subsidies Do We Need for the TEN? , 2008 .

[95]  S. Hoffmann,et al.  Managing Urban Traffic Congestion , 2007 .

[96]  Paul L. Joskow,et al.  AEI-Brookings Joint Center Working Paper , 2007 .

[97]  Kris Funston.  Real Options and Telecommunications Regulation , 2006 .

[98]  L. Waverman,et al.  The Effects of Public Ownership and Regulatory Independence on Regulatory Outcomes , 2004 .

[99]  Karsten Neuhoff,et al.  Working Papers in Economics CWPE 0463 Electricity Transmission : An Overview of the Current Debate , 2004 .

[100]  Jeffrey P. Cohen,et al.  Public Infrastructure Investment, Interstate Spatial Spillovers, and Manufacturing Costs , 2004, Review of Economics and Statistics.

[101]  Stefano Scarpetta,et al.  Regulation, Productivity and Growth , 2003 .

[102]  Restructuring Public Utilities for Competition , 2001 .

[103]  Thomas P. Lyon,et al.  Regulatory opportunism and investment behavior: evidence from the U.S. electric utility industry , 2000 .

[104]  X. Sala-i-Martin,et al.  I Just Ran Two Million Regressions , 1997 .

[105]  A. Gurney,et al.  OECD PRODUCTIVITY GROWTH: MEDIUM-TERM TRENDS , 1994 .

[106]  J. Laffont,et al.  A Theory of Incentives in Procurement and Regulation , 1993 .

[107]  Robert Ford,et al.  Infrastructure and Private-Sector Productivity , 1991 .

[108]  Ronald R. Braeutigam,et al.  An Analysis of Fully Distributed Cost Pricing in Regulated Industries , 1980 .

[109]  P. Joskow.  Pricing Decisions of Regulated Firms: A Behavioral Approach , 1973 .

[110]  Jerome L. Stein,et al.  Behavior of the Firm Under Regulatory Constraint , 1972 .

[111]  Geoffrey T. Alley,et al.  and New Zealand. , 1970 .

[112]  Akira Takayama,et al.  Behavior of the Firm under Regulatory Constraint , 1969 .