During the Great Recession, there were calls for boosting infrastructure spending to support the economy and create jobs. The extent to which “shovel-ready projects” can be funded for short-term macroeconomic gain, and the long-term growth effects of spending on infrastructure projects, are subjects of debate. Research in macroeconomics and applied microeconomics approach analysis of infrastructure spending differently, the former focusing on aggregate economic impacts and the latter using cost-benefit analyses, which can yield different recommendations about whether to undertake a project. Th ... More

During the Great Recession, there were calls for boosting infrastructure spending to support the economy and create jobs. The extent to which “shovel-ready projects” can be funded for short-term macroeconomic gain, and the long-term growth effects of spending on infrastructure projects, are subjects of debate. Research in macroeconomics and applied microeconomics approach analysis of infrastructure spending differently, the former focusing on aggregate economic impacts and the latter using cost-benefit analyses, which can yield different recommendations about whether to undertake a project. This volume draws together research on the economics of infrastructure investment, exploring links between spending and economic outcomes, and issues in funding and project management. Two themes are measurement and risk. Regarding measurement, one chapter describes processes for calculating the stock of infrastructure capital in the national income accounts, and explains the sensitivity of the estimates to a number of poorly estimated parameters. Another shows that despite public outcry over the state of U.S. infrastructure, on many metrics, the service flow from infrastructure has improved. Regarding risk, one chapter explores the treatment of risk in evaluating publicly funded infrastructure projects. It revisits the notion that unless the returns to a project are correlated with broad macroeconomic returns, it should be assessed using a riskless discount rate. Another examines the role of risk-sharing in public-private partnerships, explaining that while use of private rather than public capital could seem attractive, such arrangements could leave the public sector with most of the risk but little of the reward.