After the presentation of some figures on the composition and development of infrastructure investments in the netherlands, the subject matter of this article is assessed from three different points of view. First, the share of infrastructure production in national income and employment is estimated. The exercise is limited to infrastructure facilities provided by the public sector. This approach gives some indication of the size of economic activity related to infrastructure, in proportion to the economy as a whole. Second, the impact of infrastructure on the supply side - in particular the production capacity - of the economy is discussed. Infrastructure can be considered as a complement to economic activity. Consequently, bottlenecks can be disadvantageous to economic development and should be avoided. Furthermore, infrastructure investments are sometimes thought to induce new economic activities. A causality analysis, relating private investments to past infrastructure investments, seems to confirm this view, though the results may equally well be explained by expenditure effects. In addition an attempt was made to introduce infrastructure stock in a vintage production function for different sectors of industry. The basic idea behind this exercise was, that infrastructure investments cause disembodied technical progress. No significant results could however be obtained in this way. So, the effectiveness of infrastructure investments in general as an instrument to induce economic activity, does not seem to be beyond dispute. This may however not be so for certain specified projects. The third approach focuses on the demand side of the economy. The medium term effects of an overall increase in infrastructure investments by the public sector were evaluated, using a large macro-economic model of the dutch central planning bureau. The additional expenditure was assumed to be financed by the capital market. It turned out that an increase in employment is the result of this policy. The deficit on the budget will increase as well. Moreover, private investments eventually tend to decrease as a result of crowding-out effects. Summarising the different results, it can be stated that there is no strong argument in favour of an overall increase in infrastructure investments. Nevertheless, specific investment projects may be very beneficial to the economy, especially when serious bottlenecks exist or are expected to develop. (author/publisher)
Samenvatting