The benefits from PPPs are generally expected to come from building the infrastructure and delivery of essential public services. Infrastructure is widely recognized as one of the critical factors that determine a country's economic success. Endogenous growth models have been developed-for example, Barro (1990) and Futagami, Morita, and Shibata (1993)-to examine the impact of infrastructure on long-term production and income. Empirical studies also shed light on the positive association between infrastructure investment and economic growth. Aschauer's (1989) work in this area prompted others to look in more detail at the infrastructure-growth relationship by using sophisticated empirical methods, and using various measures of infrastructure.
Canning and Pedroni (2008) find an optimal level of infrastructure that brings long-term growth. Calderon, Moral-Benito, and Serven (2015), using an infrastructure-augmented production function for output per worker to physical capital, human capital, and a synthetic measure of infrastructure, estimate a long-term output elasticity of infrastructure ranging from 0.07 to 0.10. Calderon and Serven (2010) also find robust evidence that an increase in infrastructure stock and better-quality infrastructure services have a positive impact on long-term growth and a negative impact on income inequality. Kodongo and Ojah (2016), in a study on Sub-Saharan countries covering 2000-2011, find that higher spending on and improved access to infrastructure significantly influences economic growth and development, with lower-income countries in the region benefiting the most.
Asia's infrastructure-growth story is much the same as for other developing regions. Seethepalli, Bramati, and Veredas (2008) find a significant positive relationship between infrastructure and economic growth in East Asia. Straub and Terada-Hagiwara (2010) find that growing infrastructure stock has had a significant and positive impact on growth in countries in East Asia, South Asia, and the Pacific. Ismail and Mahyideen (2015) find that improvements in transport and information and communication technology infrastructure increased trade flows and economic growth in the Asian economies they studied.
By raising per capita GDP growth and lowering income inequality, infrastructure development-as empirical evidence shows-helps reduce poverty (Calderon and Serven 2004). Han and Wei (2017) find from their analysis of 1960-2010 data that infrastructure helps boost economic growth, especially for low-income countries. Setboonsarng (2010) argues that investments in transport infrastructure reduce poverty indirectly through economic growth. In Indonesia, Kwon (2005) finds that road investments improve poverty-alleviating variables, such as nonfarm employment, real wages, and agricultural production, in provinces with higher-than-average road density.
Among studies analyzing the distributive impact of infrastructure development, Calderon and Chong (2004) and Calderon and Serven (2004) find that income inequality declines with more and better infrastructure. Calderon and Serven (2014) find positive effects of infrastructure development on income growth and, tentatively, on distributive equity. For urban areas in the People's Republic of China, Mendoza (2017) observes that certain types of infrastructure, such as waste treatment, green spaces, and energy and water projects, are associated with reduced income inequality.