A theory of infrastructure-led development

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This paper proposes a theory of long-run development based on public infrastructure as the engine of growth. The government, in addition to investing in infrastructure, spends on health services, which in turn raise labor productivity and lower the rate of time preference. Infrastructure affects the production of both commodities and health services. As a result of network effects, the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself. Provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment, an increase in the share of spending on infrastructure (financed by a cut in unproductive expenditure or foreign grants) may facilitate the shift from a low growth equilibrium, characterized by low productivity and low savings, to a high growth steady state. © 2010 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)932-950
Number of pages18
JournalJournal of Economic Dynamics and Control
Issue number5
Publication statusPublished - May 2010


  • Infrastructure
  • Network effects
  • Poverty traps


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