The Role Of Quality Infrastructural Development : A Tool For Poverty Reduction And Ensuring Sustainable Economic Growth And Development In Ghana (Vision 2025)
Infrastructure is indispensable to achieve the main development targets in developing countries, such as urbanization, industrialization, export promotion, equitable income distribution, and sustainable economic development. Late developing countries can benefit from previous development experience provided they choose the right model.1 However the relationship between infrastructure and economic growth is still frequently debated. This paper will examine the role of quality infrastructural development in promoting economic growth and poverty reduction in Ghana
The adequate supply of infrastructure services has long been viewed as essential for economic development and poverty reduction, both in the policy and academic realms. Over the last two decades, considerable efforts have been devoted to theoretical and empirical evaluation of the contribution of infrastructure to growth and economic development. More recently, increasing attentions has also been shifting to the impact of infrastructure on poverty and inequality ( Ariya and Jerome, 2014; Calderon, 2008; Estache and Wodon, 2010; Ogun, 2010 ).
The lack of infrastructure is hindering the economic growth in many Developing countries 2. Infrastructure investment has the effects of contributing to increase the productivity and it is expected to contribute to future economic growth in developing countries where infrastructure is still insufficient. Therefore, infrastructure development is one of the most integral parts of the public policies in developing countries. Supporting infrastructure development in developing countries by advanced countries is extremely important field. This can be inferred from the fact that many international organizations such as World Bank and The Organization for Economic Co-operation and Development (OECD) are actively promoting the improvement of infrastructure by providing various support programs to developing countries.
Good infrastructure helps to raise productivity and lowers costs in the directly productive activities of the economy, but it has to be expanded fast enough to meet the demand for infrastructure in the early stage of development. For instance, Postwar, Japan, and Korea had received a large amount of concessional loans and grants from the US international organizational for rebuilding economic infrastructures.
1 ll Sakong (1993) emphasized that the late developers can draw valuable lessons from the Korea’s experience in developing its infrastructure for the economic development
2 World Bank (1994) estimated the relationship between infrastructure and economic growth in many countries including China and India
These valuable experiences give them a comparative advantage in providing cooperation of infrastructure development in developing countries. These days Japan and Korea are providing a great share of ODA for the infrastructure development in developing countries.
This paper reviews some of the ways in which infrastructure may be “important”, and by implication, considers the validity of any case to increase investment in infrastructure facilities. The first section talks about the empirical studies on infrastructure and economic growth, while the second section looks at the potential importance of public infrastructure spending to the economy. The third concludes the paper.
Empirical Studies On Infrastructure Development And Economic Growth
Infrastructure is a heterogeneous term including structures of various types used by many industries as inputs to the production of goods and services (Chan et al, 2009). This description encompasses “social infrastructure” (such as schools and hospitals) and “economic infrastructure” (such as network, utilities). The latter includes energy, water, transport and digital communications. They are essential ingredients for the success of a modern economy and the focus of this paper (Stewart, 2010).
Conceptually, infrastructure may affect aggregate output in two ways: (I) directly, considering the sector contribution to GDP formation and as an additional input in the production process of the other sectors , and (ii) indirectly, raising total factor productivity by reducing transaction and other costs thus allowing a more efficient use of conventional productive inputs. Infrastructure can be considered as a complementary factor for economic growth.
The empirical literature is far from unanimous , but a majority of the studies report a significant positive effect of infrastructure on output, productivity, or long-term growth rates. Infrastructure investment is complementary to other investment in the sense that insufficient investment constrains other investment, whiles excessive infrastructure investment has no added value. To the extent that suboptimal infrastructure investment constrains other investment, it constrains growth (Newberry, Empirical estimates of the magnitude of infrastructure’s contribution display a considerable variation across studies6. Overall, however the most recent literature tends to find smaller (and more plausible) effects than those reported in the earlier studies (Aschauer, 1989, Calderon, et al, 2011), likely as a result – at least in part – of improved methodological approaches7 that also allow better estimates of the causal relationship
The Role Of Quality Infrastructure
The importance of infrastructure in support of economic growth has long been recognized. The WBG’s 1994 World Development Report8 noted that the provision of infrastructure services to meet the demands of businesses, households and other users was “ one of the major challenges of economic development. “ In many surveys conducted by the WBG, private investors have cited reliable infrastructure services as an important consideration in their investment decisions.
Infrastructure services contribute to poverty reduction and improvement in living standards in several ways. First, these services have strong and direct links to improved health outcomes. Water – related illness account for substantial burden of disease in developing world, exacting high costs in terms of death, malnutrition, stunting and reduced Productivity. Improving water sanitation facilities have been shown to reduce these cost substantially9. Electricity permits improved health services delivery in several ways: electrification of health facilities permits safe storage of vaccines and medication and modern energy sources permit substantial reductions in morbidity and mortality associated with indoor use of wood fuels for cooking.10 The mobility provided by accessible transport services has shown
to permit women and children better access to health care services11.
Second, access to quality infrastructure services is often associated with improved educational outcomes. Electrification is strongly associated with improvement in adult literacy as well as primary school completion rates as it permits reading and studying in the evening and early morning hours. Lack of improved water facilities can work against educational outcomes, especially for girls who do not attend school for lack of adequate sanitary facilities or because of the demands of household chores like collecting water12. Access to all weather roads has been shown to be a strong factor in increasing primary school attendance, particularly in rural areas13.
Lastly, infrastructure services also contribute to improved productivity of businesses, households and government services. The time spent obtaining water and fuel or travelling to markets and service centers is often significant. When household connections are available and transport and telecommunications services are accessible, household members, particularly women and children, can engage in more productive activities. The expansion in quality and improvement in quality of infrastructure services also lowers costs and expands market opportunities for businesses. This contributes to increase investment and productivity which is essential for sustaining economic growth.
Those with the most to gain from quality infrastructural development are the poor. Investment in infrastructure is often considered as one of the most effective tools for fighting poverty. Access to infrastructure is essential for improving economic opportunities and reducing inequalities. For example, adequate transportation networks in Ghana could give better access to schools, hospitals, and centers of commerce, which in turn would improve the education, health and entrepreneurial opportunities that strength a country’s economic potential.
contribution of infrastructure to aggregate output is subject to major caveats, such as the fact of ignoring the non-stationary of aggregate output and infrastructure capital, potential simultaneity between infrastructure level and potential heterogeneity across countries ( Calderon et al 2011 : Esfahari and Ramirez, 2014 )
8 World Development Report 1994 infrastructure for development, New York, Oxford university press 1994.
9 WHO 2004, Water for Life – Making it Happen” Geneva, Switzerland.
Galiana, S.P.J. Gertler, E. Schargrodsky, 2005 “ Water for Life: the Impact of the privatization on Water Services on Child Mortality “Journal of political economy 113:83-120
Listorti, J.A. 1996 “Bridging Environmental Health Gaps” AFTES Working Papers 20-22, Urban Environmental Management, Africa technical Department, World bank, Washington, DC.
10 Hutton, G. E .Rehfuess, F. Tediosi and S, Weiss. 2006, ” Evaluation of the Costs and Benefits of Household energy and Health Interventions at Global and Regional Levels. ” Paper prepared
3,Infrastructure has been understood to include many different things, and a universally accepted definition has remained elusive. One well-known attempt reads (Gramlich, 1994): “ The definition that makes the most sense from an economics standpoint consists of large capital intensive natural monopolies such as highways, other transport facilities, water and sewer lines and communications” (in Wagenvoort et al, 2010)
4. For example, the total direct contribution of the energy sector to the UK economy in 2011 ( measured by contribution to GDP ) was £20.6bn, an increase from 2007 of 16 percent (energy UK, 2012)
5 E.g. Gramlich (1994)
6 See Romp and Haan (2007) for a review of the relevant empirical literature.
7 The empirical literature in the
for worl Health Organization, Geneva World Health Organization. 2006 b, Fuel for Life : household Energy and Health.
11 Levy, H. 2004 “Rural Roads and Poverty Alleviation in Morocco, Scaling Up Poverty Reduction: A Global Learning process and Conference, Shanghai May 25-27, 2004
Babinard, J, P. Robert 2006 “ Maternal Health and Child Mortality Goals: What can the Transport Sector do? Transport Paper TP-12, The World Bank, Washington, DC.
World Health Organization, Geneva Ezzati, M, and D. M. Kammen, 2001a. “Indoor Air Pollution from Biomass Combustion and Acute Respiratory Infections in Kenya: An Exposure- Response Study.” Lancer 358:619-24
12 Kulkarni, V., Douglas Barnes, and Sandro Parodi. 2007. “Rural Electrification and School Attendance in Nicaragua and Peru.” Draft paper, World Bank, Washington, DC.
World Bank, “ Rural Electrification and Development in the Philippines: “Measuring the Social and Economic Benefits”, Energy Sector Management Assistance Program, Report 255-2002
13 UNDP 2006 “The Human Development Report: Beyond Scarcity-Power Poverty and the Global Water Crisis”, New York
Levy, H. 2004, cited above
KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY
DEPARTMENT OF LAND ECONOMY
EMAIL: [email protected]
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