Infrastructure investment → Development: chain of analysis

ChainWhat it assumes · how to break it

Start

The government of a developing economy invests in infrastructure, for example roads, electricity and clean water.

As a result, rural producers can reach markets and transport costs fall.
market access

Best link to attack
Assumes: Projects are completed and maintained.

But: Corruption and poor maintenance mean many projects deliver less than planned, and roads that are not maintained soon become unusable.

This means farmers and small firms sell more and earn more, and reliable electricity lets firms use machinery.
productivity

Assumes: Producers can expand output.

But: Without access to credit, small producers may be unable to invest to take advantage.

Consequently, incomes rise, and roads, power and clean water improve access to schools and clinics and reduce disease.
health and education

Assumes: The gains reach the poor.

But: Benefits may go mainly to urban areas and larger firms, leaving the poorest rural households behind.

Therefore, income, health and education, the three parts of the HDI, all improve.
Human Development Index

Assumes: The investment is not paid for in ways that cut other spending.

But: If it is financed by foreign loans, debt repayments may later squeeze spending on health and education.

End

Economic development rises and the HDI increases.

Can you say this chain from memory?
Members can hide the links, test themselves and track which chains they have mastered.

Assess the importance of infrastructure in promoting economic development.
Discuss the factors that might limit growth and development in a developing economy.
Evaluate strategies to promote development.

PPF shifts outwards; or AD/AS with LRAS shifting right.

Lack of infrastructure → high costs and poor access → slower development.

GCSE version