The impact of infrastructure on economic growth in countries participating in the Belt and Road Initiative

Abstract

The paper examines the impact of infrastructure on economic growth in countries participating in the Belt and Road Initiative within the context of expanding regional and global connectivity. The impact of infrastructure on economic growth is built on a theoretical framework including Solow Growth Model, Endogenous Growth Theory and New Structural Economics. It particularly highlights the role of different types of infrastructure in driving economic growth in these countries. Utilizing a dataset from the World Bank that includes infrastructure-related variables from 144 BRI countries during the 2004–2023 period, the study employs panel data regression methods, incorporating models such as Pooled Ordinary Least Squares, Fixed Effects Model, Random Effects Model, and Feasible Generalized Least Squares to ensure the accuracy and reliability of the results. The findings indicate that infrastructure, particularly in the sectors of railways, aviation, information, and energy, has a positive impact on economic growth. Additionally, urbanization and trade openness play a crucial role in promoting growth. However, physical capital and labor capital exhibit a negative impact, suggesting inefficiencies in resource utilization. In addition to the aggregate findings, the study reveals notable heterogeneity across regions and income groups. The impact of infrastructure investment on economic growth was more pronounced in Europe and Central Asia as well as Sub-Saharan Africa, whereas relatively weaker effects were observed in the Middle East and North Africa, and in East Asia and the Pacific. When countries are classified by income level, high-income economies exhibited greater benefits from infrastructure development compared to their low-income counterparts. Furthermore, the analysis provides additional empirical evidence that following the launch of the Belt and Road Initiative (BRI) in 2013, the positive contribution of infrastructure to growth in BRI economies has tended to diminish. This result underscores the importance of time and complementary policy frameworks in ensuring that infrastructure investment generates sustained long-term economic gains. Based on these findings, this study proposes policy recommendations to optimize infrastructure investment and management, aiming to enhance efficiency and promote sustainable development in BRI countries.