INFRASTRUCTURE, LONG‐RUN ECONOMIC GROWTH AND CAUSALITY TESTS FOR COINTEGRATED PANELS

We investigate the consequences of various types of infrastructure provision in a panel of countries from 1950 to 1992. We develop new tests which enable us to isolate the sign and direction of long‐run effects in a manner that is robust to the presence of unknown heterogeneous short‐run causal relationships. We show that while infrastructure does tend to cause long‐run economic growth, there is substantial variation across countries. We also provide evidence that each infrastructure type is provided at close to the growth‐maximizing level on average globally, but is under‐supplied in some countries and over‐supplied in others.