O'Fallon: Linkages Between Infrastructure and Economic Growth

O’Fallon, C., 2003. Linkages Between Infrastructure And Economic Growth. unpublished paper prepared for the Ministry of Economic Development, Wellington, New Zealand, December.

“Information and communication technology (ICT) is perhaps better thought of as a technological innovation that is “transforming” economic productivity by shifting economic growth onto a higher level, although the overall slope of the path is expected to remain the same. In some countries, the ICT producing sector has had an impact on the economy-wide average growth, influencing “capital deepening” (increased the intensity of physical capital per unit of labour) and assisting in more efficient work organisation outside of the ICT sector, creating “spillover” gains in productivity in these other sectors. The OECD is proposing to continue to monitor ICT development and its effects. The key action for governments in respect of ICT is to ensure that the macroeconomic policy climate is functioning well to encourage further investment and innovation” (2).

OECD study found that there was an improvement in the quality of labor per unit of capital with the imposition of ICT. Inadequate infrastructure was seen as being a key driver of inequalities in growth among OECD countries. The report also identifies “capital deepening” as being an additional benefit of ICT investment.

The report is a rich overview of infrastructure to economic growth/productivity literature and ICT only represented a small section.