Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
The Global Infrastructure Gap: Potential, Perils, and a Framework for Distinction
Journal of Economic Literature
vol. 61,
no. 4, December 2023
(pp. 1318–58)
Abstract
In 2015, the World Bank claimed that rich-country private capital could: (i) close the infrastructure services gap in poor countries, (ii) achieve the sustainable development goals, and (iii) make money by moving from "billions to trillions" of investment in poor-country infrastructure. Our framework distinguishes those poor countries in which the Bank's claim is tenable from those where it is not. For a given poor country, the framework reveals that investing a dollar in infrastructure is efficient if the social rate of return on infrastructure clears two hurdles: (a) the social rate of return on private capital in the poor country, and (b) the social rate of return on private capital in rich countries. Applying the framework to the only comprehensive, cross-country dataset of social rates of return on infrastructure indicates that in 1985 just 7 of 53 poor countries cleared the dual hurdles in both paved roads and electricity.Citation
Gardner, Camille, and Peter Blair Henry. 2023. "The Global Infrastructure Gap: Potential, Perils, and a Framework for Distinction." Journal of Economic Literature, 61 (4): 1318–58. DOI: 10.1257/jel.20221530Additional Materials
JEL Classification
- H43 Project Evaluation; Social Discount Rate
- H54 National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
- L94 Electric Utilities
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- Q01 Sustainable Development