Economic Infrastructure: A Review of Definitions, Theory and Empirics

Infrastructure investment, especially in South Africa, is currently at the forefront of policy and public debate. But the term ‘infrastructure’ has a variety of definitions and interpretations; the reason for the various definitions is related to infrastructure's various impacts and incidence. Three levels of infrastructure are identified: local, national and transnational. Infrastructure at all three levels are subject to certain market failures which require some form of government intervention. Furthermore, theory postulates a number of benefits from infrastructure, both on economic growth and equity. Both the quantity (access to infrastructure) and quality (reliability of infrastructure or accompanying services) are important. Finally, empirical analysis tests whether these theoretical benefits are indeed realised. However, it seems as though infrastructure empirics are subject to a number of serious limitations.