On infrastructure and economic growth

This dissertation explores the relationship between infrastructure and economic growth. To this end, the dissertation is divided in four chapters. In chapter one we develop a structural model that helps discern the mutual effects of infrastructure, power and telecommunications, and the rest of the economy on each other. The model also allows us to examine the role of various economic and institutional characteristics in helping a country address infrastructure inadequacies and achieve efficient levels of investment. The data used for the estimation of the model is a panel data set for 125 countries over three decades (1965--75, 1975--85, and 1985--95). The results show that the contribution of infrastructure services to GDP is indeed quite substantial and in general exceeds the cost of provision of those services. In chapter two, we estimate the structural model developed in chapter one using data from twenty-four Colombian departments over three decades (1960--70, 1970--80, and 1980--90). The impact of infrastructure, power and telecommunications, on GDP growth for the Colombian departments is considerable as chapter one predicts. Chapter three and four narrow the analysis the transportation sector, particularly railroads. Chapter three studies the development of transportation infrastructure in Colombia under historical perspective taking into account the economic and political factors that could affect that development, as well as the institutions that played a role in promoting transportation during 1920--1990. Finally, chapter four, measures some of the impacts that development in transportation infrastructure could have on the Colombian economy. The chapter analyzes the responsiveness of the economy to changes in transportation costs and changes in transportation length network, by estimating the demand elasticities for railroads' freight and passenger services, and by estimating social savings. The chapter also studies the correlation between coffee expansions and transportation infrastructure improvements. Last, the chapter examines whether declines in transportation costs, due to expansions in transportation infrastructure, can explain reductions in the divergences of the agricultural prices gap among Colombian cities. Our main result is that railroads did not play an overwhelming role in the Colombian economy. The results also suggest that even highways did not help draw the country together.