An Econometric Analysis on the Relationship between Infrastructure and Economic GrowthSedef Şen, Tuğba Yılmaz
Many academics and policymakers accept that infrastructure investments and services impact economic growth. The point of view on infrastructure investments differs according to the development level of the countries. Since the infrastructure systems of many developed countries are at the saturation level, infrastructure investments in these countries generally occur in the form of improvements in the existing infrastructure stock. In many middleincome countries within the developing country group, existing infrastructure investments are insufficient. For this reason, it is necessary to provide new infrastructure investments and services. As a result, the income level of countries emerges as an important criterion to be considered in showing the effects of infrastructure investments on economic growth. Although many studies are conducted to reveal the relationship between infrastructure and economic growth for developed and underdeveloped countries (especially in the African region), this relationship is not adequately addressed in middle-income countries. For this reason, in this study, the effect of infrastructure on economic growth was examined within the framework of an endogenous growth model based on Barro (1990), considering uppermiddle- income countries for the years 2011-2020. By considering transportation, telecommunications, and energy, known as economic infrastructure types, analyses were carried out with the system GMM estimator, which is one of the dynamic panel data methods. Estimation results show that telecommunications and energy infrastructure have an effect on economic growth, but transportation does not. In addition, statistically positive and significant results have been achieved in the models in which gross fixed capital formation represents the infrastructure.
Altyapı ve İktisadi Büyüme İlişkisi Üzerine Ekonometrik Bir Analiz*Sedef Şen, Tuğba Yılmaz
Altyapı yatırımları ve hizmetlerinin iktisadi büyüme üzerinde etkili olduğu birçok akademisyen ve politika yapıcılar tarafından kabul edilmektedir. Ülkelerin gelişmişlik düzeyine göre altyapı yatırımlarına bakış açısı farklılaşmaktadır. Birçok gelişmiş ülkenin altyapı sistemi doygunluk seviyesinde olduğu için bu ülkelerde altyapı yatırımları genellikle hali hazırdaki altyapı stokunda iyileştirmeler yapma şeklinde ortaya çıkmaktadır. Gelişmekte olan ülke grubu içesinde yer alan birçok orta gelirli ülkelerde ise mevcut altyapı yatırımları yetersizdir. Bu sebeple
yeni altyapı yatırım ve hizmetlerinin sağlanması gerekmektedir. Sonuç olarak, ülkelerin gelir durumları altyapı yatırımlarının iktisadi büyüme üzerindeki etkilerini göstermede göz önüne alınması gereken önemli bir ölçüt olarak karşımıza çıkmaktadır. Gelişmiş ve özellikle Afrika bölgesindeki gelişmemiş ülkeler için altyapı ve iktisadi büyüme ilişkisini ortaya çıkarmak amacıyla yapılan çalışmalar sayıca fazla olmasına rağmen, orta gelire sahip ülkelerde bu ilişkinin yeterli derecede ele alınmadığı görülmektedir. Bu sebeple, bu çalışmada 2011- 2020 yılları için üst orta gelir grubundaki ülkeler göz önünde bulundurularak altyapının iktisadi büyüme üzerindeki etkisi Barro’ya (1990) dayanan içsel büyüme modeli çerçevesinde incelenmiştir. Ekonomik altyapı türleri olarak bilinen ulaşım, telekomünikasyon ve enerji ayrı ayrı ele alınarak dinamik panel veri yöntemlerinden biri olan sistem Genelleştirilmiş Momentler Yöntemi tahmincisi ile analizler gerçekleştirilmiştir. Elde edilen tahmin sonuçlarına göre telekomünikasyon ve enerji altyapısının iktisadi büyüme üzerinde etkili olduğu
ancak ulaşımın iktisadi büyüme üzerinde etkili olmadığı ortaya çıkmıştır. Ayrıca altyapıyı temsilen gayrisafi sabit sermaye oluşumunun göz önüne alındığı modellerde de istatistiksel olarak pozitif ve anlamlı sonuçlara erişilmiştir.
The economic effect of infrastructure investments have on economic growth has attracted a great deal of attention from policymakers and researchers since the pioneering study from
Aschauer (1989), who used the Cobb-Douglas production function approach and found public capital to be an important input for the USA and a high stock of public infrastructure
to contribute to economic growth (Elburz, Nijkamp and Pels, 2017). Following Aschauer’s (1989) seminal work, quite a number of papers have been devoted to assessing the effect of infrastructure on growth using various data and empirical methodologies (Calderón and Servén, 2010). However, no consensus exists in the literature regarding the relationship between infrastructure investment and economic growth. In part, this is because the studiescarried out to date have used different approaches for measuring infrastructure and growth and have focused on different time periods and geographies (Välilä, 2020). Many studies have found infrastructure investments to positively impact economic growth. However, some studies have found either no relationship or a negative relationship between infrastructure investment and economic growth (see Timilsina, Hochman and Song, 2020).
The points of view on infrastructure investments differ according to countries’ development levels. Because many developed countries’ infrastructure systems are at a saturation level, infrastructure investments in these countries generally occur in the form of improvements to the existing infrastructure stock. Many middle-income countries within the developing country group have insufficient existing infrastructure investments. For this reason, new infrastructure investments and services need to be provided. As a result, countries’ income level emerges as an important criterion to consider for showing the effectsThe points of view on infrastructure investments differ according to countries’ development levels. Because many developed countries’ infrastructure systems are at a saturation level, infrastructure investments in these countries generally occur in the form of improvements to the existing infrastructure stock. Many middle-income countries within the developing country group have insufficient existing infrastructure investments. For this reason, new infrastructure investments and services need to be provided. As a result, countries’ income level emerges as an important criterion to consider for showing the effects of infrastructure investments have on economic growth. Although many studies have been conducted to reveal the relationship between infrastructure and economic growth for developed and underdeveloped countries (especially in the region of Africa), this relationship has yet to be adequately addressed in middle-income countries. For this reason, this study examines the effect of infrastructure on economic growth within the framework of an endogenous growth model based on Barro’s (1990) work by considering upper-middleincome countries for the 2011-2020 period. According to endogenous growth theories, technology and human capital are not the only factors influencing economic growth. Barro asserted things such as government investment in education and infrastructure to also play asignificant role in economic growth. According to Barro (1990), investing in public infrastructure is motivated by two factors: in a positive scenario, an increase in productive government spending will boost private capital’s marginal product and generate sustained growth in per capita income, whereas in a negative scenario, per capita growth decreases when taxing income is used to finance public infrastructure.
This study employs a system generalized method of moments (GMM) estimation approach for measuring the effects of different infrastructure types on economic growth.
According to the GMM estimation results, telecommunication, energy use, electricity consumption, and gross fixed capital formation have significant and positive effects, while
transportation has no impact on economic growth in higher middle-income countries. The telecommunication model shows a 1% increase in investment in telecommunication to increase economic growth by 0.0098 units. Energy use and electricity consumption models indicate a 1% increase in energy use and electricity consumption to increase economic growth by 0.0073 and 0.0152 units, respectively. Finally, the gross fixed capital formation model shows a 1% increase in gross fixed capital formation to increase economic growth by 0.029 units. The insignificant findings regarding the transportation model may be due to a lack of data. In this paper, we find evidence that infrastructure investment is essential for promoting economic growth. The evidence also suggests that this role does not differ in higher-middleincome countries. The empirical approach encompasses different infrastructure types to
account for the potential effect of every single infrastructure component, and the results indicate that all infrastructure types except transportation significantly impact economic growth.