## **Table 3. Examples of studies analyzing relationships between infrastructure investments, income inequality and poverty reduction**

|**Study**|**Methodology**|**Findings**|
|---|---|---|
|Calderon and<br>Chong (2004)|GMM on dynamic panel data set for<br>101 economies for the year 1960-1997|Infrastructure stock is negatively linked with inequality; the relationship is<br>more prominent in low-income countries.<br>Estimated elasticity-1.3830**|
|Calderon and<br>Serven (2004)|GMM on dynamic panel data set for<br>period 1960-2000 from 121 countries|Infrastructure investment played a larger role to lower income inequality in<br>East and South Asia, where it did only a modest role in Sub-saharan Africa.<br>Estimated elasticity:-0.0464**|
|Calderon and<br>Serven (2010)|Panel data analysis of 87 countries for<br>1960-2005 period focusing on Sub-<br>Saharan Africa; GMM technique for the<br>econometric analysis; two scenarios for<br>infrastructure shocks|The increased access to infrastructure services (i.e., improved quantity and<br>quality of infrastructure) would decrease income inequality; the income<br>inequality, measured in terms of Gini Coefficient, is found strongly negatively<br>correlated with the synthetic indices used as measures of infrastructure quantity<br>and quality; the correlation values range from-0.47 to-0.56.|
|Chatterjee and<br>Turnovsky<br>(2012)|A general equilibrium model of a closed<br>economy|Public spending on infrastructure would reduce income inequality in the short-<br>run, whereas it would increase in the long-run.|
|Sasmal and<br>Sasmal (2016)|Panel data analysis for Indian states|The lager is the public expenditures on the development of infrastructure, the<br>higher is per capita income and lower poverty headcount|
|Chotia and Rao<br>(2017a)|Auto-regressive distributed lag (ARDL)<br>bound testing approach|Infrastructure development reduces poverty in India|
|Chotia and Rao<br>(2017b)|Pedroni’s panel co-integration test and<br>panel dynamic ordinary least squares<br>(PDOLS) method|Infrastructure development and economic growth lead to a reduction of poverty<br>and urban-rural inequality in BRICS countries|
|Hooper et al.<br>(2018)|US state-level panel data for 60 years<br>(1950-2010)|Infrastructure investment reduces income inequality; the relationship is<br>stronger at the bottom 40 percent (by income) population|

# **5. Some Issues Related to Infrastructure and Economic Growth or Inequality**

There are several issues related to the relationship between infrastructure and economic growth, as well as inequality. These include: how much the quality of infrastructure matters; is the marginal effect of infrastructure diminishing? What are the channels through which infrastructure affects economic growth and inequality (such as increased productivity of firms, employment, or labor market). Short-term vs. long-term impacts of infrastructure, infrastructure, and institutions, and so on. Each of these issues could be the topic of a separate paper and cannot be discussed in this paper. Below, we highlight a few of them. Some of these issues require further studies for better understanding and are highlighted in the next section.

# **_5.1 Quality of Infrastructure_**

The existing literature on infrastructure and economic growth deals mostly with the quantity of infrastructure. Studies analyzing the impacts of infrastructure quality are limited due to the lack of time-series data representing the quality of infrastructure. A few studies, however, address this issue, although the findings are inconclusive. For example, Calderon and Serven (2010) find, using data from more than 100 countries, a positive relationship between infrastructure 26