An Econometric Analysis on the Relationship between Infrastructure and Economic Growth

Abstract

Many academics and policymakers accept that infrastructure investments and services impact economic growth. The point of view on infrastructure investments differs according to the development level of the countries Since the infrastructure systems of many developed countries are at the saturation level, infrastructure investments in these countries generally occur in the form of improvements in the existing infrastructure stock. In many middle-income countries within the developing country group, existing infrastructure investments are insufficient. For this reason, it is necessary to provide new infrastructure investments and services. As a result, the income level of countries emerges as an important criterion to be considered in showing the effects of infrastructure investments on economic growth. Although many studies are conducted to reveal the relationship between infrastructure and economic growth for developed and underdeveloped countries (especially in the African region), this relationship is not adequately addressed in middle-income countries. For this reason, in this study, the effect of infrastructure on economic growth was examined within the framework of an endogenous growth model based on Barro (1990), considering upper-middle-income countries for the years 2011-2020. By considering transportation, telecommunications, and energy, known as economic infrastructure types, analyses were carried out with the system GMM estimator, which is one of the dynamic panel data methods. Estimation results show that telecommunications and energy infrastructure have an effect on economic growth, but transportation does not. In addition, statistically positive and significant results have been achieved in the models in which gross fixed capital formation represents the infrastructure