The impact of infrastructure investments on the country’s economic growth

Abstract

This study aims to assess the positive impact of infrastructure investments on the dynamics of economic growth. The sample includes ten countries (Azerbaijan, Albania, Belarus, Bulgaria, China, Georgia, Mexico, Moldova, Serbia, and Turkey) for 2011–2020 that meet the following criteria: belong to upper-middle-income economies (according to the World Bank Atlas method); the OECD statistical database contains data on investment volumes in infrastructure development of road, railway transport, inland waterways, sea, and airports (by all financing sources). The primary focus was put on the analysis of this issue in Azerbaijan. GDP per capita growth was selected as the resulting parameter; the main dependent variable was infrastructure investment volumes (total inland and infrastructure road, rail, and air investment), and additional dependent variables were a foreign direct investment (net inflows) and gross domestic investment. Shapiro-Wilk test (for checking normal data), Spearman and Pearson methods (for correlation estimation), Granger test (for detecting causal relationships), and Arellano-Bond dynamic panel-data estimation (for influence formalization) were used. As a result, the following parameters exert the greatest influence on economic growth level: value of gross domestic investment (its growth by 1% causes GDP per capita growth to increase by 0.54% without a time lag); value of infrastructure investment inland (total) (by 1.51% with a three-year lag); value of infrastructure road investment (by 0.41% with a three-year lag). These results can help future research and decision-making at different management levels to strengthen economic growth through infrastructure investment.

Keywords

• airport
• FDI
• GDI
• GDP
• infrastructure gap
• railway