compressors, which have to be imported (Pauschert 2009). Turbines of larger power plants are generally produced in factories in the United States and Europe. But a significant share (about 40 percent to 50 percent) of capital for substations today is imported from emerging markets, such as India and China. As can be seen in Table 2, low-income countries import more power generatingequipment from China than from the United States.

**Table 2: Imports of power-generating equipment (2010)**

|Exporters→|High|Income Ec|onomies|(HIE)||L|ow and M|iddle Inco|me Econo|mies(LMI)|||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Importers↓|All HIE|HIEuro<sup>2</sup>|USA|Other HIE|All LMI|EAP|China|ECA|LAC|MNA|SAS|SSA|
|LMI|76.47%|34.17%|16.87%|25.43%|19.93%|12.01%|9.89%|4.57%|2.78%|0.22%|0.01%|0.33%|
|LDC|63.54%|43.79%|6.48%|13.27%|35.41%|27.50%|24.15%|1.53%|0.91%|1.31%|0.07%|4.08%|
|EAP|81.25%|23.15%|8.68%|49.42%|16.27%|13.72%|9.31%|1.96%|0.54%|0.00%|0.01%|0.04%|
|ECA|64.24%|51.42%|5.43%|7.40%|23.36%|6.66%|6.49%|16.09%|0.58%|0.02%|0.00%|0.00%|
|LAC|82.74%|23.80%|46.58%|12.36%|15.67%|5.41%|4.21%|0.50%|9.34%|0.00%|0.00%|0.42%|
|MNA|82.84%|61.78%|6.74%|14.31%|15.61%|8.15%|7.86%|5.16%|0.35%|1.73%|0.01%|0.21%|
|SAS|59.50%|32.36%|6.92%|20.22%|38.91%|30.64%|28.76%|7.37%|0.65%|0.17%|0.03%|0.05%|
|SSA|74.16%|52.17%|6.96%|15.03%|24.91%|18.73%|17.57%|0.80%|2.04%|0.74%|0.00%|2.59%|

1Power generating equipment corresponds with SITC Revision 4 code 71, which is comprised of steam boilers, steam turbines, internal combustion piston engines, various other non-electric engines and motors, rotating electric plants, and other power-generating machinery and parts thereof not elsewhere specified 2HIEuro is comprised of the following high income European nations: Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, Spain, Sweden, and the United Kingdom. Source: Author's calculations based on WITS, UN COMTRADE database.

41. Simulations confirm that infrastructure investments in developing countries can significantly contribute to a global recovery and improve the trade balance in advanced economies. McKibbin, Stoeckel and Lu (2011) contrast the results of a permanent 1 percent increase of world GDP in government infrastructure investment versus an equivalent increase in current spending on goods and services in developing countries using a multicountry, multisector intertemporal general equilibrium model of the world economy (Figure 3).<sup>29</sup> They find that a rise in current spending leads to only a small increase in output that dissipates over time as a larger stock of government debt acts as a drag on overall economic activity. In contrast, the authors estimate that with a rise in infrastructure investment, GDP in developing countries rises by almost 7 percent over a ten-year period. World GDP rises by about 2 percent. Because spending on infrastructure raises private returns to capital in emerging countries, more capital flows into these economies to finance the expansion of the government as well as the private sector. As a result,

> 29 Simulations on infrastructure spending in this paper use the findings of a recent study that used panel data for 88 countries to determine that output rises by 0.8 percent for each 10 percent increase in infrastructure stock (Calderón, Moral-Benito, and Servén 2011).

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