Although infrastructure is widely recognized as a key ingredient in a country’s economic success, many issues surrounding infrastructurespending are not well understood. This paper explores six themes: the returns to infrastructure; the role of the private sector; the evaluation and delivery of infrastructure in practice; the nature of network industries, pricing and regulation; political economy considerations of infrastructure provision; and infrastructure in developing countries. This paper aims to provide insights into many of these questions, drawing on the existing literature.

The paper lays out basic design options for infrastructure policy. It first sketches mechanisms to assess demand. Then it sets out a hierarchy of issues starting with choice of market structure followed by conduct regulation. Ownership options are largely a function of market structure choices. The implications for finance—the topic of much day-to-day discussion in infrastructure policy-making—follow from these various prior choices. The discussion naturally circumscribes the role for the so-called public-private partnerships, their uses and pitfalls.

Against the backdrop of anti-globalization rhetoric, this paper summarizes our joint book entitled Going Beyond Aid (Lin and Wang, 2017a) and discusses the prospects for development finance in the broad context of Belt and Road Initiative (BRI). Based on the New Structural Economics (Lin, 2010; 2011), here we focus on China’s demonstrated comparative advantages in infrastructure, e.g. in hydropower and high-speed railways (HSR). In addition, long-term orientation (LTO) and patient capital are latent comparative advantages that many Asian economies possess, and are critical for the Belt and Road Initiative. Only if these comparative advantages are utilized can these economies cooperate to potentially achieve win-win.

Contemporary infrastructure research has its origins in the late 1980s as attempts were made to measure the economic impact of public expenditures with early mixed results. In the 1990s, infrastructure assumed greater importance as a policy solution to improve economic performance in low-income economies particularly by multilateral development and official development agencies. This interest led to greater research interest with the examination of infrastructure and economic development, foreign direct investment, the role of institutions and capital markets, procurement, regional economic effects and more recently, the productivity of public investment in specific regions and industries. 

This article identifies subjects that warrant further research in the future particularly the shortfall in current investment levels and how this will be met. This is a challenge for both low and high-income countries with fiscal and public debt constraints requiring governments to tap alternative sources of finance. Policy options available to government include wider use of bond markets and private participation in infrastructure provision and management. Other problems facing government include optimism bias and forecasting error that is a particular problem for projects in the transport sector. 

Many other research opportunities remain to be explored and this article is designed to provide an overview of several of the subjects that would benefit from further research at the present time.