How does infrastructure support sustainable growth?

The Infra4Dev Conference, jointly organized by the World Bank and the International Growth Centre on March 3rd-4th 2022, brought together the academic and policy-making community to exchange knowledge and insights regarding the roles that infrastructure can play in catalyzing development. The Lightning Talk Sessions showcased emerging research on jobs, trade, and sustainable growth.

Infrastructure affects growth through several supply and demand-side channels. Investments in energy, telecommunications, and transport networks directly impact growth, as all types of infrastructure represent an essential input in any production of goods and services.  In addition, infrastructure can also reduce the cost of delivered goods, facilitate the physical mobility of people and products, remove productivity constraints, and increase competitiveness.

Emerging research showcased at the 2022 Infra4Dev Conference, quantified using econometric techniques the impact of infrastructure on growth, both for basic access to infrastructure services as well as more sophisticated infrastructure. In case you missed the conference, this blog will give you a brief round-up of some of the most interesting results from the Lightning Talks on Sustainable Growth and other key papers presented:

• Digital Infrastructure and Local Economic Growth: Early Internet in Sub-Saharan Africa by Valentin Lindlacher, University of Munich

Fixed-line internet availability, even at basic speeds, has strong impact on local economic growth of towns, leading to about two percentage points higher economic growth of Sub-Saharan African towns  in the years after connection, compared to similar but later connected towns. The results are derived from a difference-in-differences analysis, using night-time light satellite data in 10 Sub-Saharan African countries in the early 2000s as a measure of evolving economic development.

• Electricity Access and Structural Transformation: Evidence from Brazil's Electrification by Jevgenijs Steinbuks, World Bank

Access to electricity explains 21% of the structural transformation process in Brazil between 1970 to 2006.  The channels through which this impact takes place are generation of higher returns on investment or decreasing entry costs in sectors with greater infrastructure intensity. Econometric analysis suggests that manufacturing is the sector that benefits the most on these dimensions, followed by services and agriculture.

• Mobile Access Expansion and Price Information Diffusion: Firm Performance after Ethiopia's Transition to 3G by Woubet Kassa, World Bank

Mobile internet, primarily through smart phones, can close information asymmetry gaps between buyers and sellers in countries such as Ethiopia , where fixed broadband communication is limited and there is little transport and other market infrastructure available. In particular, mobile internet enables faster mobile broadband connection, expansion of data-enabled phones, and increased flexibility and mobility.

• China’s Journey to the West: Using High-Resolution Satellite Imagery to Evaluate Transportation Improvement in Central Asia by Cong Peng, Harvard Kennedy School

Expanded road networks lead to a one percentage point increase in the size of urbanized areas, albeit at the cost of increasing air pollution and deforestation. Urbanization is measured through built-up area, as detected through remote sensing data from high-resolution satellites using Artificial Intelligence. The results are confirmed using an innovative spatial panel derived using the Demographic and Health Survey (DHS) data.

• Impacts of Electricity Quality Improvements: Experimental Evidence on Infrastructure Investments by Robyn Meeks, Duke University

The use of smart meters leads to substantial improvements in electricity service quality, as illustrated by the randomized installation of smart meters, which utilities can install to monitor service quality in Kyrgyz Republic. Treated households made significantly more energy efficiency investments, potentially mitigating their electricity consumption increases post-intervention.

While infrastructure can lead to beneficial economic outcomes, the concrete development impact of infrastructure depends significantly on how infrastructure investment strategies are defined and implemented.  The following papers highlight two important aspects. First, spatially coordinated development of different types of infrastructure can help to amplify returns. Second, infrastructure investment must be accompanied by policy reforms aimed at mitigating tradeoff between social and environmental sustainability.

• Can Big Push Infrastructure Unlock Development? Evidence from Ethiopia by Niclas Moneke, University of Oxford

In the case of Ethiopia while isolated road and electrification investments increased welfare by only 2% and 0.7% respectively, the welfare effect resulting from combined big push infrastructure investments is at least 11%.  The results are derived with a spatial general equilibrium model, that highlights markedly different patterns of impact across different types of infrastructure. Whereas access to an all-weather road alone increases services employment, additionally electrified locations see large reversals in the manufacturing employment shares.

• Aid Against Trees? Evidence from a Community-Driven Development Program in the Philippines by Jeffrey Pagel, London School of Economics and Political Sciences

Community-Driven Development programs in the Philippines have been found to have adverse environmental impacts, notably deforestation. The largest effects arose from infrastructure subprojects, which include trails, bridges and roads areas which experienced 126% more deforestation per year relative to the control group. 

• Damned by Dams? Infrastructure and Conflict by Ulrich Eberly, Princeton University

The construction of large dams can give rise to social conflicts in affected communities, particularly if these are poorly designed and consultation with affected populations is not adequately pursued. This multi-country study found that in the immediate vicinity of newly built dams, there was a significant increase in intrastate conflict, but no robust effect for interstate conflict. This could be due to ethnic frictions, as well institutional failures.

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You can access to all the previous Infra4Dev blogs here.