although not exclusively) or physical indicators. The early literature using aggregate measures of public capital stocks has been unable to uncover a positive link between infrastructure and outcome variables in more than half of the cases. As mentioned above, the literature has gradually shifted to the use of physical indicators and this move has coincided with papers reporting more positive results.

There are at least two reasons why public capital figures are not very good proxies for infrastructure, or to put it differently, why infrastructure is not “public” capital.<sup>31</sup> First, a significant part of investment in infrastructure is made by the private sector. For example, in 7 Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Mexico and Peru), private investment represented 16.4% of total investment in the period 1980-85, and 62.9% in 1996-2001 (Fay and Morrison, 2007). Because the trends in public versus private investment in sectors such as transportation, electricity or telecommunications have responded to a number of macroeconomic and institutional determinants, both at the national and international level, it should be obvious that measuring infrastructure stocks using only public investment figures introduces systematic measurement errors and renders most estimations unreliable.

An even more serious problem is that even if we could use total public and private investment in infrastructure sectors, there are serious reasons to think that stock figures computed from investment flows do not reflect effective infrastructure stocks and the level of services that they provide. The main reason for that is the fact that, especially in developing countries, the official costs of investments are often disconnected from their effective value, mostly because of governmental inefficiencies or institutional weaknesses (see Pritchett, 1996 for a more detailed discussion).

The second and related point already discussed in the theoretical section above is that infrastructure is often not a pure public good. In part because of its private sector origin, it is increasingly taking a private good nature and its services are being priced. The flow of services that accrue to private operators like firms is therefore more relevant than the stock of infrastructure capital, however well it is measured.

These shortcomings have to some extent been responsible for the trend towards physical indicators. However, to date physical infrastructure proxies suffer from three main problems. First, there are not systematically available across suitable geographical units and time. Second, the indicators currently used are often relatively bad proxies of the services they are supposed to capture. Third, the quality dimension of infrastructure services, which appears crucial to private operators, is almost completely absent from these indicators.

Finally, does the level of aggregation of data have an impact on the results? Although the trend is not overwhelming, it seems that results become more positive as we move towards a more disaggregated level. This is particularly clear when one looks at results from household-survey and firm-based survey based studies. In what follows,

> 31 The issue of the choice of indicators is discussed in more details in Straub (2007).

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