The Economic Effects of Infrastructure Investment in Countries at Different Stages of Economic Development

Abstract

Abstract A study into the effectiveness of infrastructure investment though the use of case study and data analysis. The aim of the thesis was to find the key differences in infrastructure between nations at different stages of economic development; this relates to not only the effectiveness of infrastructure but also the possible need for different forms of infrastructure to support and grow an economy. The infrastructure that has been important historically was also analysed in terms of its relevance to modern economies. The creation of ‘ideal types’ was used as a basis for a regression analysis trying to explain GDP per capita in terms of the infrastructure of low, middle and high income countries. A case study analysis was also undertaken to highlight some of the possible key variables for use within the data analysis. The conclusions highlight the need for infrastructure for an economy to develop, and the particular need for infrastructure that supports the industries of an economy, industries that tend to change for countries at different stages of economic development. The data analysis helped to draw conclusions about the effectiveness of infrastructure for high, middle and low income countries. It suggested that, in agreement with the pre-existing literature, it is middle income countries that benefit most from infrastructure investment. It can be suggested that this result is likely to be due to the favourable combination of highly-skilled workers and low-paid labourers; a combination that isn’t found in high, and low income countries. The findings also suggest that the infrastructures that had large, favourable economic effects in the past now have reduced importance for modern economies, economies that tend to benefit much more from infrastructure relating to technological progression.