Network Effects and Infrastructure Productivity in Developing Countries


  • We would like to thank Santiago Herrera for his support and his comments on a previous version of this work (World Bank Policy Research Working Paper 3808). We are also indebted to Mohamed Belkir, an anonymous referee, the Oxford Bulettin editor, Jonathan Temple, as well as participants at the AFSE annual meeting 2006, ESEM meeting 2006 in Vienna and the 13th International Conference on Panel Data in Cambridge for stimulating comments and remarks. All the codes (developed with Matlab R2010 and WinRats) are available on the website of the authors. The usual disclaimers apply.


This study proposes to investigate the threshold effects in the productivity of infrastructure investment in developing countries. It concludes to their presence in the relationship between output and private and public inputs as well as network effects in the productivity of infrastructure. When the available stock of infrastructure is low, investment has the same productivity as non-infrastructure investment. On the contrary, when a minimum network is available, the marginal productivity of infrastructure investment is greater than the productivity of other investments. Finally, when the main network is achieved, its marginal productivity becomes similar to the productivity of other investment.