Investment in infrastructure as a key to sustainable economic recovery: the role of the building industry
Abstract
The focus of this paper is the role of the building industry in post-COVID-19 economic recovery plans. Investment in infrastructure forms a major part of many countries’ strategies to engender economic growth and construction is the pivotal industry in enabling the implementation of the plans in a sustainable manner. This study looks at the effects of investment in infrastructure on the economy with reference to the role of the construction industry in delivering this investment. Basic issues are considered, particularly concerning how relevant investment can be measured and how the contribution of the construction sector can be realistically assessed. A review of data sources and empirically peer-reviewed papers is undertaken. Based on longitudinal time series data from national statistics agencies and international organizations, analysis is undertaken to discover the relationship between infrastructure investment and economic growth. The study focuses on the UK, but comparisons are made with other countries to consider alternative approaches to stimulus investment policies with digitalization, and sustainability and green investment being a growing feature of investment plans. Potential issues of these approaches are examined and the main barriers to their achievement are identified. Emerging trends and a set of policy agendas are proposed to guide future directions.
First published online 18 January 2023
Keyword : COVID-19, construction industry, infrastructure, environmental policy, sustainable recovery, economic growth
How to Cite
Ruddock, L., & Ruddock, S. (2022). Investment in infrastructure as a key to sustainable economic recovery: the role of the building industry. International Journal of Strategic Property Management, 26(6), 439–449. https://doi.org/10.3846/ijspm.2022.18430
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Kodongo, O., & Ojah, K. (2016). Does infrastructure really explain economic growth in Sub-Saharan Africa? Review of Development Finance, 6(2), 105–125. https://doi.org/10.1016/j.rdf.2016.12.001
Lehr, U., Lutz, C., & Edler, D. (2012). Green jobs? Economic impacts of renewable energy in Germany. Energy Policy, 47, 358–364. https://doi.org/10.1016/j.enpol.2012.04.076
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Luoto, J. (2011). Aggregate infrastructure capital stock and long-run growth: evidence from Finnish data. Journal of Development Economics, 94(2), 181–191. https://doi.org/10.1016/j.jdeveco.2010.02.001
Meng, J., Zhu, Y., & Han, Y. (2022). Can ‘new’ infrastructure become an engine of growth for the Chinese economy? Journal of Chinese Economic and Business Studies, 1–22. https://doi.org/10.1080/14765284.2022.2036571
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Wei, M., Patadia, S., & Kammen, D. M. (2010). Putting renewables and energy efficiency to work: how many jobs can the clean energy industry generate in the US? Energy Policy, 38(2), 919–931. https://doi.org/10.1016/j.enpol.2009.10.044
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Wu, X., Zhong, P., & Huang, X. (2020). Does ‘new infrastructure’ improve the technical efficiency of strategic emerging industries? Finance and Economics, 11, 65–80.
Anguera, R. (2006). The Channel Tunnel—an ex post economic evaluation. Transportation Research Part A: Policy and Practices, 40(4), 291–315. https://doi.org/10.1016/j.tra.2005.08.009
Ansar, A., Flyvbjerg, B., Budzier, A., & Lunn, D. (2014). Should we build more large dams? The actual costs of hydropower megaproject development. Energy Policy, 69, 43–56. https://doi.org/10.1016/j.enpol.2013.10.069
Ansar, A., Flyvbjerg, B., Budzier, A., & Lunn, D. (2016). Does infrastructure investment lead to economic growth or economic fragility? Evidence from China. Oxford Review of Economic Policy, 32(3), 360–390. https://doi.org/10.1093/oxrep/grw022
Banerjee, A., Duflo, E., & Qian, N. (2020). On the road: access to transportation infrastructure and economic growth in China. Journal of Development Economics, 145, 102442. https://doi.org/10.1016/j.jdeveco.2020.102442
Calderón, C., & Servén, L. (2004). The effects of infrastructure development on growth and income distribution (Policy Research Working Paper No. 3400). World Bank. https://doi.org/10.1596/1813-9450-3400
Canning, D. (1998). A database of world stocks of infrastructure, 1950–95. The World Bank Economic Review, 12(3), 529–547. https://doi.org/10.1093/wber/12.3.529
Chartered Institute of Building. (2020). The real face of construction 2020. https://www.ciob.org/industry/research/Real-Face-Construction-2020
Dvořák, P., Martinát, S., van der Horst, D., Frantál, B., & Turečková, K. (2017). Renewable energy investment and job creation: a cross-sectoral assessment for the Czech Republic with reference to EU benchmarks. Renewable and Sustainable Energy Reviews, 69, 360–368. https://doi.org/10.1016/j.rser.2016.11.158
Easterly, W., & Rebelo, S. (1993). Fiscal policy and economic growth. Journal of Monetary Economics, 32(3), 417–458. https://doi.org/10.1016/0304-3932(93)90025-B
Esfahani, H. S., & Ramírez, M. T. (2003). Institutions, infrastructure, and economic growth. Journal of Development Economics, 70(2), 443–477. https://doi.org/10.1016/S0304-3878(02)00105-0
Eurostat. (2021). Eurostat database. https://ec.europa.eu/eurostat/data/database/
Fiorito, R., & Kollintzas, T. (2004). Public goods, merit goods, and the relation between private and government consumption. European Economic Review, 48(6), 1367–1398. https://doi.org/10.1016/j.euroecorev.2004.01.004
Flyvbjerg, B. (2009). Survival of the unfittest: why the worst infrastructure gets built–and what we can do about it. Oxford Review of Economic Policy, 25(3), 344–367. https://doi.org/10.1093/oxrep/grp024
Garcia-Milà, T., McGuire, T. J., & Porter, R. H. (1996). The effect of public capital in state-level production functions reconsidered. The Review of Economics and Statistics, 78(1), 177–180. https://doi.org/10.2307/2109857
Garrett-Peltier, H. (2017). Green versus brown: comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model. Economic Modelling, 61, 439–447. https://doi.org/10.1016/j.econmod.2016.11.012
GlobalABC, & PEEB. (2020). Programme for energy efficiency in buildings: status 2020. Paris. https://www.peeb.build//imglib/downloads/PEEB_Status%202020_final_web%20200519.pdf
Goldfarb, A., & Tucker, C. (2019). Digital economics. Journal of Economic Literature, 57(1), 3–43. https://doi.org/10.1257/jel.20171452
Han, X., Su, J., & Thia, J. P. (2021). Impact of infrastructure investment on developed and developing economies. Economic Change and Restructuring, 54, 995–1024. https://doi.org/10.1007/s10644-020-09287-4
Hepburn, C., O’Callaghan, B., Stern, N., Stiglitz, J., & Zenghelis, D. (2020). Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change? Oxford Review of Economic Policy, 36(1), S359–S381. https://doi.org/10.1093/oxrep/graa015
HM Treasury. (2020). Spending review 2020. https://www.gov.uk/government/publications/spending-review-2020-documents
Holtz-Eakin, D., & Schwartz, A. E. (1995). Infrastructure in a structural model of economic growth. Regional Science and Urban Economics, 25(2), 131–151. https://doi.org/10.1016/0166-0462(94)02080-Z
House of Commons Library. (2022). Nuclear Energy (Financing) Bill 2021-22 (Research Briefing No. CBP-9356). https://researchbriefings.files.parliament.uk/documents/CBP-9356/CBP-9356.pdf
Hulten, C. R., & Schwab, R. M. (1991). Public capital formation and the growth of regional manufacturing industries. National Tax Journal, 44(4), 121–134. https://doi.org/10.1086/NTJ41788927
International Energy Agency. (2020). Sustainable recovery: world energy outlook. Paris. https://www.iea.org/reports/sustainable-recovery
International Monetary Fund. (2021). World economic outlook. International Monetary Fund.
Infrastructure Australia. (2021). 2021 Australian infrastructure plan. https://www.infrastructureaustralia.gov.au/publications/2021-australian-infrastructure-plan
Ismail, N. W., & Mahyideen, J. M. (2015). The impact of infrastructure on trade and economic growth in selected economies in Asia (ADBI Working Paper No. 553). Asian Development Bank Institute. https://doi.org/10.2139/ssrn.2709294
Khanna, R., & Sharma, C. (2021). Does infrastructure stimulate total factor productivity? A dynamic heterogeneous panel analysis for Indian manufacturing industries. The Quarterly Review of Economics and Finance, 79, 59–73. https://doi.org/10.1016/j.qref.2020.08.003
Khurriah, H., & Istifadah, N. (2019). The role of infrastructure in Indonesia’s economic growth. International Journal of Advances in Scientific Research and Engineering, 5(7), 215–222. https://doi.org/10.31695/IJASRE.2019.33447
Kodongo, O., & Ojah, K. (2016). Does infrastructure really explain economic growth in Sub-Saharan Africa? Review of Development Finance, 6(2), 105–125. https://doi.org/10.1016/j.rdf.2016.12.001
Lehr, U., Lutz, C., & Edler, D. (2012). Green jobs? Economic impacts of renewable energy in Germany. Energy Policy, 47, 358–364. https://doi.org/10.1016/j.enpol.2012.04.076
Liu, S. J. (Ed.). (2020). Complementary growth and upgrading growth. In Ten year prospect of China’s economic growth (pp. 5–8). CITIC Publishing Group (in Chinese).
Liu, Z., & Liu, X. (2022). Is China’s infrastructure development experience unique? Journal of Chinese Economic and Business Studies, 1–18. https://doi.org/10.1080/14765284.2022.2040074
Luoto, J. (2011). Aggregate infrastructure capital stock and long-run growth: evidence from Finnish data. Journal of Development Economics, 94(2), 181–191. https://doi.org/10.1016/j.jdeveco.2010.02.001
Meng, J., Zhu, Y., & Han, Y. (2022). Can ‘new’ infrastructure become an engine of growth for the Chinese economy? Journal of Chinese Economic and Business Studies, 1–22. https://doi.org/10.1080/14765284.2022.2036571
O’Callaghan, B., & Murdock, E. (2021). Are we building back better? Evidence from 2020 and pathways for inclusive green recovery spending (Oxford University Economic Recovery Project, United Nations Environment Programme). https://recovery.smithschool.ox.ac.uk/are-we-building-back-better-evidence-from-2020-and-pathways-for-inclusive-green-recovery-spending/
OECD. (2021a). The OECD economic outlook: sources and methods. http://www.oecd.org/eco/outlook/sources-and-methods.htm
OECD. (2021b). Green recovery database: examining the environmental implications of COVID-19 recovery policies. OECD Publishing.
OECD iLibrary. (2022). Infrastructure investment. https://www.oecd-ilibrary.org/transport/infrastructure-investment/indicator/english_b06ce3ad-en?parentId=http%3A%2F%2Finstance.metastore.ingenta.com%2Fcontent%2Fthematicgrouping%2F8dacf707-en
Office for National Statistics. (2017). Developing new measures of infrastructure investment. https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/articles/developingnewmeasuresofinfrastructureinvestment/july2017
Office for National Statistics. (2018). Developing new statistics of infrastructure. https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/articles/developingnewmeasuresofinfrastructureinvestment/august2018
Office for National Statistics. (2019). Experimental comparisons of infrastructure across Europe. https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/articles/experimentalcomparisonsofinfrastructureacrosseurope/may2019
Office for National Statistics. (2021). National accounts. https://www.ons.gov.uk/economy/nationalaccounts
Ren, Z., Xiong, C., Sun, W., & Liang, Y. (2020). China’s new infrastructure research report. Evergrande Research Institute.
Shi, Y., Guo, S., & Sun, P. (2017). The role of infrastructure in China’s regional economic growth. Journal of Asian Economics, 49, 26–41. https://doi.org/10.1016/j.asieco.2017.02.004
Statista. (2021). G7 countries 2021 survey. https://www.statista.com
The Economist. (2021). What is infrastructure? https://www.economist.com
The Official Portal of the UAE Government. (2021). Infrastructure and vision. https://u.ae/en/information-and-services/infrastructure/infrastructure-and-vision-2021
United Nations. (2015). Transforming our world: the 2030 agenda for sustainable development. New York.
United Nations Environment Programme. (2020). 2020 global status report for buildings and construction: towards a zero emission, efficient and resilient buildings and construction sector. Nairobi. https://globalabc.org/resources/publications/2020-global-status-report-buildings-and-construction
USA Today. (2022). Building a better America. https://eu.usatoday.com/
Wang, E. C. (2002). Public infrastructure and economic growth: a new approach applied to East Asian economies. Journal of Policy Modeling, 24(5), 411–435. https://doi.org/10.1016/S0161-8938(02)00123-0
Wei, M., Patadia, S., & Kammen, D. M. (2010). Putting renewables and energy efficiency to work: how many jobs can the clean energy industry generate in the US? Energy Policy, 38(2), 919–931. https://doi.org/10.1016/j.enpol.2009.10.044
World Bank. (2019). World Bank annual report 2019. Washington, DC.
World Bank. (2022). World development indicators. https://datacatalog.worldbank.org/dataset/world-development-indicators
World Economic Forum. (2019a). Global Future Council (GFC) on infrastructure. https://www.weforum.org/agenda/2019/
World Economic Forum. (2019b). The global competitiveness report. https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
Wu, X., Zhong, P., & Huang, X. (2020). Does ‘new infrastructure’ improve the technical efficiency of strategic emerging industries? Finance and Economics, 11, 65–80.