Public Investment, Growth and Fiscal Constraints
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Public Investment, Growth and Fiscal Constraints

Challenges for the EU New Member States

Edited by Massimo Florio

This book makes a unique contribution in advancing understanding of the fiscal condition and growth potential of the New Member States of the European Union. It provides new data, policy evaluation, and offers national and regional perspectives. The core research questions are the effect of public investment in the context of macroeconomic disequilibrium and how it is possible to finance capital accumulation in the present and future conditions of mounting public sector debt.
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Chapter 9: Infrastructure Investment Opportunities in the EU New Member States: The Role of Regional Policies

Emanuela Sirtori and Silvia Vignetti

Extract

9. Infrastructure investment opportunities in the EU New Member States: the role of regional policies Emanuela Sirtori and Silvia Vignetti 1. INTRODUCTION Infrastructure development is a priority on policy agendas in the EU and worldwide. Governments at different levels (supra-national, national, regional and local) invest a large share of their funds for infrastructure projects in transportation, energy production, telecommunications, water and sanitation. It is estimated that half of public investment in the EU member states is for infrastructure, the largest proportion being in the Cohesion Countries and New Member States (NMS).1 Investment needs in basic infrastructures are still very high, especially in lagging-behind regions and countries. A recent OECD study estimates that, in order to cope with infrastructure investment needs to 2030, annual investments in transport, energy, water and telecommunications should be roughly equal to 2.5 per cent of world GDP (OECD, 2007). Traditionally, different endowments in basic infrastructures (as well as other ingredients such as factors of production, natural resources and technology) between regions or countries have been seen as the cause of disparities in economic performance. Justification of public funding for infrastructure stems from the expectation that they foster economic growth by enhancing factor productivity, and promote convergence in income distribution and living standards. Literature shows that although this holds true at an aggregate level (at the country level and with an aggregate measure of infrastructural endowment, see for example Aschauer, 1989; Barro, 1990, and other papers cited by Del Bo in a earlier chapter), if the...

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