World Bank: Economic development unlocked: a meta-analysis of infrastructure’s impact
June 20, 2023 The debate on the role of infrastructure investments in promoting resilient and inclusive growth is especially relevant as the global economy seeks recovery from the COVID-19 pandemic. Key questions include the most effective ways to expand access across infrastructure sectors, the influence of a country’s initial development level, and the true impact of such investments on development outcomes like output, poverty, inequality, and human capital formation. A new study by the World Bank Infrastructure Chief Economist’s Office, through a meta-analysis of research since the 1980s across the transport, energy, and digital sectors, aims to provide clarity on these issues. This study is notable for its comprehensive database of almost a thousand estimates from 201 papers spanning from 1983 to 2022, marking the first to explore the impact across these three sub-sectors of infrastructure. The analysis identified a publication bias, a common issue in economics research, where studies are more likely to report statistically significant results. By adjusting for this bias, the study aims to estimate the true effects of infrastructure investments. The findings suggest that the impact of infrastructure on development is relatively modest, with elasticities for individual sectors ranging between 0 and 0.06, smaller than those initially indicated by cross-sectoral studies. However, the impact appears to be more significant in developing countries, especially in the digital and transport sectors, and even more so in rural areas for the transport sector. This highlights the potential of targeted infrastructure investments to contribute to development in these contexts. The study also discusses the possibility of leveraging these elasticity estimates to calculate marginal rates of return for specific sector outcomes, indicating a direction for further research. This involves developing updated infrastructure capital stock figures to better understand the scale of impacts and returns from infrastructure investments, thus guiding policy priorities and sectoral focus for enhancing development outcomes.