INFRASTUCTURE AND ECONOMIC GROWTH IN ASIAN DEVELOPING COUNTRIES

Abstract

This paper analyzes the relationship between infrastructure and economic growth in Asian developing countries relying on an augmented Solow growth model with infrastructure. Using fixed effect model in estimating the data from year 1986-2011, the findings exhibit that generally all infrastructure sectors (road, rail lines, electricity production, telephone, and mobile phone) has a positive and significant impact on economic growth. Furthermore, the introduction of interaction dummies between regions and physical infrastructure indicators give some important insight regarding infrastructure and growth by region. Infrastructure in New Industrialized Economies (NIEs) countries appears to have highest impact on NIEs� growth, followed by South Asia (SA) and Association of Southeast Asia Nations (ASEAN) countries. However, the results also indicate that infrastructure cannot promote economic growth alone. Even if the infrastructure level is growing or improving, it does not mean that this is enough to encourage economic growth