The economic geography of infrastructure in Asia: The role of institutions and regional integration

Abstract

We examine the spillover effects of infrastructure on economic growth after controlling institutions and regional integration. We develop an augmented endogenous growth model to test the complementarity between proximate factors and infrastructure to explain regional growth dynamics. We build a multidimensional infrastructure index, capturing quantitative and qualitative dimensions using the Alkire-Foster method. The empirical analysis is based on 35 Asian economies during the 2006–2016 period using the spatial Durbin panel model. The results show that infrastructures have a positive and significant effect, both direct and spillover, on regional development. The quality of the infrastructure has a relatively higher direct impact, and the quantity has a relatively high spillover effect. These results show that the amount of infrastructure is more beneficial for the regions. On the contrary, quality is more fruitful for the country. Furthermore, the analysis confirms the complementarity of infrastructure with institutions and regional integration, which implies that these factors act as a stimulus to improve the spillover effects of the infrastructure. This analysis supports infrastructure development policies to achieve sustained economic growth in Asia. Infrastructure is a “big push” for these economies to improve their economic status and eliminate poverty. The complementarity of institutions and regional integration requires these factors to be considered in planning infrastructure development policies, particularly for economic corridors.