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Infrastructure and regional growth


This World Bank research on infrastructure and regional growth uses spatially explicit models of accessibility in econometric analysis of regional growth and productivity.

Contact: Uwe Deichmann,


 Research outputs 

Infrastructure, especially transport sector investments, are considered a key driver of regional economic growth. By improving access to input and output markets, lowering of transport costs enables economies of scale and stimulates agglomeration. This increases firm productivity, raises wages and improves welfare. A series of research activities in Mexico, Bangladesh, India, and Indonesia, explore the role of infrastructure in local development.

 Research outputs

Information communication technology and development
Rapid growth of internet use in high-income economies has raised the specter of a "digital divide" that will marginalize developing countries. Using new cross-country datasets, this research investigates two proximate determinants of the digital divide:
 internet intensity (internet subscriptions per telephone mainline), and access to telecom services.

Infrastructure improvements raise city competitiveness
This book chapter examines how the combination of city level and national infrastructure development in India improve city competitiveness, measured as the city’s share of national private investment. The supply of city-level infrastructure servicessuch as municipal roads, street lighting, water supply, and drainagehas positive effects on competitiveness. At the same time, a city’s access to inter-regional infrastructure has a much greater effect on its attractiveness for private investment. Thus, while local efforts are important for competitiveness, they are less likely to be successful in cities that are distant from the country’s main trunk infrastructure.
  • "Infrastructure and City Competitiveness in India," Somik V. Lall, Hyoung Gun Wang and Uwe Deichmann, in Beyond the Tipping Point: Benefits and Challenges of Urbanization, ed., Jo Beall, Basudeb Guha-Khasnobis, and Ravi Kanbur, UN WIDER, London School of Economics, 2009.

Better transport access to urban markets raises non-farm sector wages
This paper presents empirical evidence on the relative importance of farm and urban linkages for rural non-farm employment in Bangladesh. The results suggest that people are more likely to be employed in well-paid wage employment and self-employment in the non-farm sector if they are closer to urban centers. Those who are further away from such centers are even less likely to be in wellpaying non-farm jobs if they are living in areas with greater agricultural potential. The empirical results highlight the need for improved connectivity of regions with higher agricultural potential to urban centers for non-farm development in Bangladesh.
  • "Urban Proximity, Agricultural Potential and Non-Farm Employment: Evidence from Bangladesh," Uwe Deichmann, Forhad Shilpi, and Renos Vakis, World Development 37(3):645-60, 2009.
  • "Spatial specialization and farm-nonfarm linkages," Uwe Deichmann, Forhad Shilpi, Renos Vakis, World Bank Policy Research Working Paper 4611, 2008.

Urban growth patterns in Brazil reflect regional economic dynamics
This study examines the determinants of Brazilian city growth between 1970 and 2000 using a dataset of 123 agglomerations. The main findings are that decreases in rural income opportunities, increases in market potential for goods and labor force quality and reduction in intercity-transport costs have strong impacts on city growth. Local crime and violence, measured by homicide rates impinge on growth.
  • "Determinants of City Growth in Brazil," Daniel da Mata, Uwe Deichmann, J. Vernon Henderson, Somik V. Lall and Hyoung Gun Wang, Journal of Urban Economics 62 (2), 252-72, 2007.
  • "Determinants of city growth in Brazil," Daniel da Mata, Uwe Deichmann†, J. Vernon Henderson, Somik V. Lall, and Hyoung Gun Wang, World Bank Policy Research Working Paper 3723, 2005.

Benefits from infrastructure investments spill over state borders in India
What is the contribution of publicly supplied infrastructure to sub national regional growth in India? This study develops a regionally disaggregated model of economic growth to understand the dynamics of private capital and public infrastructure. It then examines empirically if publicly supplied infrastructure is a significant determinant of regional growth and whether there are spatial variations in these productivity effects. The main findings are that transport and communications infrastructure expenditures are significant determinants of regional growth with positive externalities from network expenditures made by neighboring states.
  • "Infrastructure and Regional Growth: Growth Dynamics and Policy Relevance for India," Somik V. Lall, Annals of Regional Science 41(3): 581-99, 2007.


Infrastructure alone is unlikely to attract industries to lagging areas 
How effective are public interventions in addressing significant regional disparities in formal manufacturing concentration in a developing economy? This study examines the impact of factors such as road infrastructure in influencing location choices of manufacturing firms in Indonesia. The findings suggest that improvements in transport infrastructure may only have limited effects in attracting industry to secondary industrial centers outside of Java. This underscores the challenges for addressing the industrial fortunes of lagging regions, either through local decentralized policy interventions or national policies focused on infrastructure development.

Infrastructure investments in lagging areas can be effective when accompanied by other policies 
This analysis examines economic structure and productivity in Southern Mexico and compares these to the rest of the country. The findings suggest that the economic structure of the South is considerably different from the rest of the country, with a dominance of micro enterprises, relative specialization in low productivity activities, low skill levels and fewer skill upgrading opportunities. The econometric analysis shows that while employee training and technology adoption enhance productivity, access to markets through improvements in transport infrastructure linking urban areas will also have important productivity effects.
  • "Economic structure, productivity, and infrastructure quality in Southern Mexico," Uwe Deichmann, Marianne Fay, Jun Koo and Somik V. Lall, Annals of Regional Science 38: 361-85, 2004. (Based on World Bank Policy Research Working Paper 2900, 2002)

Market access improves productivity at the firm, industry and regional level
To what extent do agglomeration economies contribute to economic productivity? This analysis distinguishes three sources of agglomeration economies: (1) at the firm level from improved access to market centers, (2) at the industry level from intra-industry localization economies, and (3) at the regional level from inter-industry urbanization economies. The results indicate that access to markets through improvements in inter-regional infrastructure is an important determinant of firm level productivity, whereas benefits of locating in dense urban areas do not appear to offset associated costs.

Last updated: 2009-08-31

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