Abstract
This chapter analyzes the economic effect of infrastructure, focusing on the productivity effect of public investment, and discusses how to promote the private sector investment in infrastructure by enhancing the rate of return to investors by utilizing part of spillover effects from the infrastructure. Traditional highway or railway investment relies on toll fees or train fees, which are often regulated to keep the price low. Private investors find it difficult to obtain an adequate rate of return. This chapter proposes the incremental tax revenues along the highway or railway should contribute a certain fraction of tax revenues (say 30%) to investors in infrastructure.
The important factors for further promoting the use of private sector resources in infrastructure development include (i) government involvement in high-risk infrastructure projects and risk sharing between government and the private sector, (ii) an earnings structure that appropriately reflects the spillover effect of infrastructure (e.g., return of some spillover tax revenues to infrastructure investors), and (iii) systems designed to increase incentives for infrastructure-operating entities.
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Notes
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The number of workers and number of employees do not consider the number of workers with a sideline, unlike estimates of the System of National Account of Japan.
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See OECD (2008) concerning the classification of risk under public–private partnership projects.
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Nakahigashi, M., Yoshino, N. (2017). Changes in Economic Effect of Infrastructure and Financing Methods: The Japanese Case. In: Yoshino, N., Taghizadeh-Hesary, F. (eds) Japan’s Lost Decade. ADB Institute Series on Development Economics. Springer, Singapore. https://doi.org/10.1007/978-981-10-5021-3_2
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