Spillover Effects of Infrastructure,
Desired Exchange Rate SystemandAging Economy
Naoyuki YOSHINO
Dean & CEO
Asian Development Band Institute (ADBI)
Professor Emeritus, Keio UniversityDecember, 2018
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Infrastructure Investment Needs
in Asia-Pacific (2016-2030)($ billion in 2015 prices, annual average)

Baseline
Total
Central Asia
East Asia

South Asia
Southeast Asia
The PacificAsia & Pacific

33919
365
184
2.8
1503

% of GDP

ClimateAdjusted

6.8
4.5
7.6
5.0
8.2
5.1

381071
423
210
3.1
1744

Source: Meeting Asia’s Infrastructure Needs, ADB (2017)% of GDP

7.85.2
8.8
5.7
9.1
5.9
3

Private Finance for Infrastructure
1, Banks --- Safer projects and shorter term
Brown field (infrastructure)
Invest into operation period
Securitization after certain period of time
Privatized projects by the government
2, Insurance and Pension funds (Long term)Long term projects (10 years –20- 30 years)
3, Infrastructure Bonds (revenue bond)uncertain income streams
4, Equity Investments in Infratructure
Construction period and Green fields
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Spillover Effects ofInfrastructure Investment

Rail Way and Road

5Outcome

Concept of subsidy based on additional flowof tax revenue due to infrastructure
Treatment Group∆Tax=𝒕 ∗ ∆Y∆Tax(no need for increase in tax rates)

Subsidy = 0.5*∆Tax

Control group

α+β0α

𝑵

𝑶𝒖𝒕𝒄𝒐𝒎𝒆 = 𝜶 + 𝜷𝟎 𝑫𝒊 +Time𝜷𝟎 ∗ 𝑫𝒊 ∗ 𝑻𝒕 + 𝜺𝒊,𝒕𝒕=𝟏

Injection of Increased Tax Revenues toIncrease the Rate of Return
Total rateof return

Possible rateof return forinvestor after
transfer
Increase of tax
revenue by
spillover effect

User Charges

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Southern Tagalog Arterial Road (STAR)
Philippines (Yoshino and Pontines, Chapter 3)• STAR tollway built toimprove road linkage
between Metro Manila andBatangas International Port.
• Tax revenue increased
during construction andafter completion incommunes along thetollway.

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(Yoshino and Abidhadjaev, Chapter 2)

Context: Japan
Travel time to Kagoshima
BeforeAfterTokyo

9h 00m7h 20mShin-Osaka

6h 20m4h 40mHakata3h 50m2h 10mKumamoto

2h 30m1h 00mShin-Yatsushiro

2h 10m35m

Kyushu Shinkansen
Japan

Source: https://www.acprail.com/rail-passes/japan-rail/bullet-train/kyushu-shinkansen

9Estimation Results by Group of Prefectures
Group 2200000

Group 7Group 3

Difference-in-difference coefficients across periods

15000010000050000
0-50000

During Construction Period[1991-2003]

Total Tax

During 1st Phase ofOperation [2004-2010]

Personal Income Tax

During 2 Phase of Operation[2011-2013]

Corporate Tax

Other Taxes

Group 8.

Impact took place during construction,
decreased during operation ofsegmented(autonomous) rail line andbounced back after connection togreater rail system
Note: Numbers for tax revenue amount adjusted for CPI with base year 1982. Preshinkansen construction period covers years from 1982 to 1990. Non-affected groups
include rest of the prefectures. Treated groups:Group 2: Kagoshima, Kumamoto
Group 3: Kagoshima, Kumamoto, Fukuoka
Group 5: Kagoshima, Kumamoto, Fukuoka, Oita, MiyazakiGroup 7: Kagoshima, Kumamoto, Fukuoka, Oita, Miyazaki, Saga, Nagasaki
Group Con.: Kagoshima, Kumamoto, Fukuoka, Yamaguchi, Hiroshima, Okayama, Hyogo,Osaka

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Source:Music –Securities
HomePage
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Financing for Start-ups along Roads(Hometown crowd funding)

Source:Music Securities—Home page

Infrastructure & Education
Yoshino and Umid Abidhadjaev (2016)
Dependent variable: log difference GDP per capita in 1991-2010
Regression number
Variables
lnY_1991
ln(n+g+d)ln(Kg)

REG.1
Coef.
-0.06
(-0.54)-3.09(-0.59)0.23(1.17)

REG.2
Coef.
-0.14
(-1.35)-5.75(-1.23)0.31(2.00)ln(Sec)ln(Kg)xln(Sec)

REG.3
Coef.
-0.14
(-1.38)-4.36(-0.77)0.53(3.30)
0.00(0.46)

0.20(1.59)ln(Uni)

0.21(2.07)

ln(Kg)xln(Uni)Constant-0.28(-0.33)0.24(2.76)
0.56(0.69)

Number of observations
R-squared
F-statistic

44.00
0.21
2.62

44.00
0.30
4.14

0.48(0.57)

44.00
0.30
3.29

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New Book on Infrastructure• “FINANCING INFRASTRUCTURE• IN ASIA AND THE PACIFIC:• Capturing Impacts and New Sources”• Edited by Naoyuki Yoshino, Matthias Helble, and Umid
Abidhadjaev––––

the latest evidence on the impact of infrastructure
investment on economic and social indicators
country studies on how infrastructure investment canincrease output, taxes, trade and firm productivity
innovative modes of infrastructure financing
DOWNLOAD FOR FREE:
https://www.adb.org/publications/financinginfrastructure-asia-capturing-impacts-and-new-sources

15

Yoshino, Naoyuki and Masaki Nakahigashi （2004） “The Role of Infrastructure in EconomicDevelopment”, ICFAI Journal of Managerial Economics, 2, pp. 7-24
Nakahigashi, M and Yoshino, N. (2016) “Changes in Economic Effect of Infrastructure andFinancing Method”, Public Policy Review, Vol.12, No.1.
Yoshino, N. and Pontines, Victor (2015) “The Highway-Effect on Public Finance: Case of theSTAR Highway in the Phillippines”, GIE | AAA Special Kick-off Edition, GIE Network
publishing.
Yoshino, Naoyuki and Victor Pontines （2015） “The Highway Effect on Public Finance: Caseof the STAR Highway in the Philippines”, Asian Development Bank Institute （ADBI）
Working Paper No.549.
Yoshino, Naoyuki and Umid Abidhadjaev (2017), “An impact evaluation of investment ininfrastructure: The case of a rail way connection in Uzbekistan”. Journal of AsianEconomics, 49, 1-11, 2017
Yoshino, Naoyuki and Umid Abidhadjaev (2017), “Impact of infrastructure on tax revenue:
Case study of high-speed train in Japan”, Journal of Infrastructure, Policy and Development,Vol.1, Issue 2.
Yoshino, Naoyuki, Umid Abidhadjaev and Makaki Nakahigashi (2018), “Closing the AsianInfrastructure Gap”, HORIZONZ, Journal of International Relations and Sustainable
Development, Issue No.10, Winter 2018.
Yoshino, Naoyuki, Matthias Helble and Umid Abidhadjaev (2018), Financing Infrastructurein Asia and the Pacific: Capturing Impacts and New Sources, Asian Development BankInstitute.
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Analysis on Dynamic Transition (China)• Policies toward Stable Regimes• 𝐿 𝑇0 , 𝑇1 , 𝑇2 =𝑇0 +𝑇1 +𝑇2 𝑡−1𝛽(𝑦𝑡 − 𝑦′)2𝑡=118

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(1) Gradual Change in Capital Opening(2) Develop China’s Financial Market(3) Dynamic Basket Currency SystemThank you so much for your attention

Naoyuki YOSHINO
Dean & CEO,Asian Development Bank Institute (ADBI)