Infrastructure spending has been viewed as a prerequisite for economic development since Adam Smith, and most empirical studies have found that infrastructure has a significant positive effect on growth. Many studies take it as a given that, through its role in job creation and improvements in productivity, improvements in infrastructure will also lead to inclusive growth.
However, studies have shown major infrastructure programmes can often increase inequality despite boosting aggregate growth, as the centre of a country benefits significantly more than peripheral regions (Winters, 2014). For infrastructure to be used effectively as part of an inclusive growth strategy, practitioners should implement complementary policies as part of a broader development strategy to ensure the poor benefit (ADB, 2012; Winters, 2014). In particular, small-scale infrastructure projects are viewed as having a more direct positive impact on the lives of poor people (Jahan and McCleery, 2012).
Asian Development Bank (2012). Infrastructure for Supporting Inclusive Growth and Poverty Reduction in Asia. Mandaluyong City, Philippines: Asian Development Bank.
This book starts from the premise that infrastructure is synonymous with development, and explores three key themes: the role of infrastructure in supporting inclusive growth, the need for ‘soft infrastructure’, and the role of public-private partnerships (PPPs) in infrastructure development. It is well established that infrastructure leads to inclusive growth as it creates jobs, reduces production costs, improves production capacity, and creates connections to new markets. The authors note that infrastructure investments have been demonstrated to be most effective when accompanied by other interventions, such as education or health spending. The presence of soft infrastructure – the rules and regulations that govern the use and functioning of physical infrastructure – will also amplify the effects of infrastructure in promoting inclusive growth, by creating an environment that facilitates efficient delivery. Finally, the authors recommend scaling up infrastructure-related PPP arrangements in Asia, as a means of decreasing the fiscal burden for governments and multiplying the impact of public sector resources.
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Jahan, S. and McCleery, R. (2005). Making Infrastructure Work for the Poor: Synthesis Report of Four Country Studies – Bangladesh, Senegal, Thailand and Zambia. New York: UNDP.
This report first conducts a comprehensive review of the ‘infrastructure-poverty reduction-governance nexus’, highlighting mechanisms by which infrastructure can lead to growth and poverty reduction, and critical issues for project governance. Based on the findings from the four country studies, the authors then make a case for small-scale community-based infrastructure projects. They argue that they are more likely to have a direct positive impact on the lives of poor people while still complementing large-scale infrastructure initiatives. A key finding from the country studies is that small-scale infrastructure projects contribute significantly to reducing income poverty through increased wages and job opportunities. However, small-scale infrastructure was also found to positively impact the poor more broadly by reducing mortality rates, improving education, and empowering women. To maximise the impact of small-scale infrastructure, the authors recommend projects with complementary components or multiple objectives (e.g. a road that creates jobs, enables better access to education and health, and increases mobility for women).
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OECD. (2006). Promoting Pro-Poor Growth: Infrastructure. Paris: OECD.
This report evaluates the role of infrastructure in promoting pro-poor growth. It argues that economic infrastructure (e.g. transport, energy, ICT, water and sanitation) contributes to growth by lowering costs and raising labour productivity. Despite this, the IMF and World Bank have found that annual investment in infrastructure in developing countries falls far short of the level required. The report recommends four principles for enhancing the contribution of infrastructure spending to pro-poor growth. Firstly, a country-led infrastructure framework linked to other economic and social development strategies should be used. Secondly, the investment in infrastructure should be targeted to impact as many poor people as possible, both as beneficiaries and in the implementation and maintenance of the infrastructure. Thirdly, promoting sustainability by emphasising infrastructure maintenance, helping partner countries establish systems to recover costs, and encouraging ongoing investment and adequate support services, will be critical. Finally, to encourage investment in infrastructure from governments and the private sector, donors should provide predictable and long-term investment using a range of financial instruments, accompanied by appropriate technical assistance.
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Winters, A. (2014). Globalization, Infrastructure, and Inclusive Growth. Tokyo: Asian Development Bank Institute.
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