Infrastructure development: economic growth effects

Abstract

The development of infrastructure, while demanding considerable financial resources, is expected to give positive returns and facilitate economic growth in many countries and regions. The aim of this article is to investigate the effects on growth through various channels. The study consists of two parts: an empirical analysis of macroeconomic growth associated with improvements in infrastructure on the example of the European Union (EU) and CIS during past decades, and an econometric model formalizing the observations. The results show that infrastructure development, along with private and public investments, has a positive correlation to growth and output. However, the risks issues related with investments in infrastructure should be cogitated as one of the key elements.