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For the stock of infrastructure, offsetting forces were hypothesized. The results from the consolidated budget expenditure regressions indicate that diminishing returns are offset by the expenditure required to offset depreciation of the existing stock of infrastructure or cross country differences in the degree of complementarity between infrastructure and the existing productive structure of the economy. The result is not, however, robust across all definitions of the stock of infrastructure. In particular, no significant relationship is found when the stock is measured as the road and rail kilometers relative to the GDP, or more broadly as the total capital stock (private plus public) of the country.

The level of development was hypothesized to positively, but possibly nonlinearly, influence the level of infrastructure expenditures, since government services and goods are expected to be normal goods, and structural changes accompanying development are expected to increase the return to infrastructure investments. The linear and positive relationship found for consolidated budget per capita infrastructure expenditures is robust and is not sensitive to how the level of development is measured.

The size of the foreign sector was also hypothesized to be positively related to the expenditures on infrastructure given the link between the size of the foreign sector and taxable capacity. Support for this hypothesis is robust. Similarly, the level of foreign savings flows was hypothesized to be positively related to government expenditures on infrastructure since these flows can either directly be used for infrastructure expenditures or reduce budgetary outlays for other items, freeing up funds for infrastructure investment. This hypothesis receives robust confirmation from the consolidated budget infrastructure expenditure regressions.

We speculated that, holding the total level of foreign savings flows constant, countries receiving a higher proportion of foreign funding in the form of commercial bank flows might allocate a different amount for infrastructure expenditures, although no a _prior_ hypothesis was made concerning the direction of the impact. The results here robustly indicate that countries receiving a high proportion of foreign flows in the form of commercial bank loans spend more on infrastructure out of the consolidated budget. In fact, the estimated relationship indicates infrastructure expenditures increase at an increasing rate as the share of commercial bank loans in foreign savings flows increases.

In addition to the five factors mentioned above, there is qualified evidence that countries with a better external balance spend more out of the consolidated budget on infrastructure. While the trade balance relative to the GDP did not have a measurable impact on consolidated budget expenditures, the evidence indicates that countries with a lower black market exchange rate premium or that are more outward oriented do have higher consolidated budget per capita infrastructure expenditures. This finding implies that the focus of stabilization and structural adjustment programs on improving the external balance in and of itself tends to increase per capita consolidated infrastructure expenditures. However, to the extent that these programs succeed in improving the internal balance or inadvertently reduce GDP growth, this positive impact may be offset.