Roads to deeper European integration
Henrik Braconier, Mauro Pisu, 20 February 2014
Despite substantial integration, national borders still provide a large obstacle to trade in Europe. This column shows that much of these ‘iceberg costs’ can be attributed to underdeveloped infrastructure, namely roads. Improving international roadways to the level of national ones could substantially raise gains to trade.
Over the past 60 years, increasing European integration has brought peace and security, besides contributing to large social welfare gains (through lower prices and a larger variety of products).
Topics: International trade
Tags: infrastructure, trade costs
US electrification in the 1930s
Carl Kitchens, 29 January 2014
Economists have found that large-scale infrastructure investments tend to increase economic growth and reduce poverty. However, there has been relatively little research on the effects of smaller, more targeted investment projects. This column discusses recent research on the effects of the US Rural Electrification Administration, which provided subsidised loans for connecting farms to the electric grid. Counties that received electricity through the REA witnessed smaller declines in agricultural productivity, smaller declines in land values, and more retail activity than similar counties that did not.
In 1930, fewer than 10% of farms in the US had access to electricity. By the mid-1950s, almost every farm in the country had electricity. While the US was able to extend electricity to its rural locations rapidly over a 25-year period, much of the developing world still remains without electricity today. In 2012, 1.3 billion people lived without electricity worldwide.
Topics: Development, Economic history
Tags: Agriculture, electricity, electrification, growth, infrastructure, investment, subsidies, technology
Transport infrastructure and market integration: Lessons from the British industrial revolution
Liam Brunt, Edmund Cannon, 27 July 2013
The EU justifies its funding of large-scale transport infrastructure projects by arguing that it leads to more market integration. Does it work? This column uses evidence from Britain and its Industrial Revolution to assess the extent to which transport infrastructure projects increase market integration. By comparing industrialising Britain with today’s EU, the EU’s record turns out to be quite good and its investment in large infrastructure projects has led to significant price dispersion. However, recent financial turmoil has undermined its efforts in recent years.
For many years, the EU has prioritised the funding of large-scale transport infrastructure projects. Between 2007 and 2013 alone, the Trans-European Transport Network programme funded 348 projects at a cost of €7billion (TEN-T Executive Agency 2013). The goal of this investment has been to increase the integration of European markets.
Topics: Economic history
Tags: EU, infrastructure
New roads to export: Insights from the Inca roads
Jerónimo Carballo, Christian Volpe Martincus, Ana Cusolito, 13 July 2013
Expanding road infrastructure is often justified on the basis of its presumed effects on exports. Yet, available evidence on to what extent these effects really materialise is very limited due to difficulties faced in convincingly identifying true casual relationships. Historical road networks can help overcome this endogeneity challenge. This column provides evidence for Peru based on the Inca road network and suggests that improvements in road infrastructure have had a significant impact on firms’ exports and thereby on job creation.
In policy circles domestic transport infrastructure is seen as a key determinant of exports. More precisely, among policymakers, there is a well rooted idea according to which new roads can generate increased exports. Statements in official documents introducing public export plans of developed and developing countries alike are illustrative in this regard.
Topics: International trade
Tags: Export, infrastructure, Peru
Infrastructure: The governance failures
Nicklas Garemo, Jan Mischke, 30 March 2013
Investment in infrastructure can bring growth and social benefits. This column highlights the infrastructure opportunities open to depressed economies, stressing that the main obstacles are governance-related. To bring opportunities to life will require an overhaul of infrastructure governance – a root cause of infrastructure projects’ poor productivity.
Europe’s infrastructure programme was the big loser from February’s EU budget deal. Planned infrastructure investment of €50 billion over seven years was reduced to just €24 billion.
Topics: Industrial organisation, Politics and economics
Tags: governance, infrastructure
Can passenger railways curb road-traffic externalities? Empirical evidence
Rafael Lalive, Simon Luechinger, Armin Schmutzler, 15 March 2013
Against a backdrop of road accidents, pollution and congestion, many governments subsidise railways with the aim of reducing such externalities. But do improvements in public transport work? This column argues that recent empirical evidence confirms our expectations and, moreover, that public-transport improvements offer good value for money.
Road accidents kill 1.2m people every year (WHO). Road transportation is the main source of local air pollutants such as nitrogen oxide and carbon monoxide. It contributes to noise and global air pollution, and it leads to congestion. Against this backdrop, many governments subsidise railways with the explicit aim of reducing road-traffic externalities.
Topics: Environment, Frontiers of economic research, Productivity and Innovation
Tags: externalities, infrastructure, pollution, railways, trains
Highway to success in India
Ejaz Ghani, Arti Grover Goswami, William Kerr, 5 February 2013
Investment in transport plays an important role in a country’s economic development. This column assesses Indian industries that are moving out of the congested big cities in search of cheaper land and buildings, facilitated by major highways. The Golden Quadrilateral highway project -- a huge, country-wide highway building project connecting four major Indian cities -- significantly influences the success of industries’ exodus from the big cities. It is clear that although highway investments are expensive, the costs of not investing may be too high.
Transport investments within cities and across cities are essential for economic growth, job creation, and poverty reduction. Beyond simply facilitating cheaper and more efficient movements of goods, people, and ideas within cities, transport affects the distribution of economic activity across cities.
Tags: Golden Quadrilateral, highways, India, infrastructure, roads
The privatisation of infrastructure: One size does not fit all
Alexis Maingard, Laura Recuero Virto, 16 September 2011
Is privatisation of infrastructure a cheap road to development? This column argues that policymakers should recognise that what works for some situations won’t work for all. When it comes to infrastructure, the column suggests that governments and international financial institutions should look beyond the private sector.
he wave of infrastructure privatisations that occurred from the 1980s onwards has led to very different sectoral outcomes across the world (Bortolotti and Siniscalco 2004). For the case of fixed-line telecommunications, in OECD countries privatisations have resulted in higher labour efficiency. By contrast, in non-OECD countries privatisations have mainly increased residential tariffs.
Topics: Development, Institutions and economics, Politics and economics
Tags: infrastructure, privatisation