Relationship between population resources and infrastructure stocks

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relationship between population resources and infrastructure stocks

(For more on the importance of infrastructure, see Build Your The most glaring aspect of China is the sheer size of its population a bigger footprint in China as its local conditions, resources and other FDI determinants are enhanced. of their anticipated market shares located outside of the local market. Table 3. Comparison of infrastructure stocks cross meta-countries, relative to . One effect of this is to force misallocation of resources to compensate for the low productivity in estimated at 24 per cent of the total population, compared with 48 per cent in peer Few papers focus on the relation between output and energy. to analyze the link between infrastructure, growth, and productivity. Increasing level of infrastructure stock, therefore, has direct implication for poverty .. and Singapore where more than 80% of the total population already live in urban .. advantage, such as infrastructure endowments, wage rates, and natural resource .

This problem may be worsened by the low yields commonly obtained from infertile tropical soils. But we also need to recognize that these problems are not only an issue of population density.

Displacement of farmers by large-scale farms causes some to seek new areas to farm and graze animals—using ever more marginal or ecologically fragile land. Some countries have populations so large relative to their agricultural land that importing of food will be needed into the foreseeable future. One of the largest of these nations is Egypt, with a population of over 80 million people and arable land of 0.

These countries are condemned to suffer the consequences of rapid international market price hikes that occur frequently and of having to maintain significant exports just to be able to get sufficient hard currency to import food.

Similarly, a rich developed country like the Netherlands is able to draw unsustainably on resource taps and dispose of its environmental effluents in waste sinks at the expense of much of the rest of the world. All else being equal—which, of course, it never is—larger populations on the earth create more potential environmental problems.

So population is always an environmental factor—though usually not the main one, given that economic growth generally outweighs population growth and environmental degradation arises mainly from the rich rather than the poor.

If we assume that all people will live at a particular standard of living, there is a finite carrying capacity of the earth, above which population growth will not be sustainable because of rapid depletion of too many resources and too much pollution.

There are currently approximately 7 billion people in the world and, given current trends, the population is expected to be around 9 billion inand over 10 billion by Since these are countries in which populations are growing at fast rates with growth in sub-Saharan Africa the most rapidit seems at first blush to make some sense to concentrate efforts on this issue.

But when looked at more deeply, it is clear that this is not a solution to the real problems—global-scale nonrenewable resource depletion and environmental degradation—that so concern these people. David Harvey has explained the problem of concentrating on population issues as follows: Ideas about environment, population, and resources are not neutral.

They are political in origin and have political effects. There is little to no discussion of how the economy functions or of issues involving economic inequality. Also there is apparently no interest in even thinking about an alternative way for people to interact with each other and the environment or how they might organize their economy differently.

Although these examples are very important—because they are concrete demonstrations of alternative ways of people interacting with each other and the environment—they do not add up to a new economy or new society that operates with a completely different motivation, purpose, and outcome than capitalist society. It is only common sense that the more wealth a person or family has, the more stuff they consume and, therefore, the more resources they use and the more pollution they cause.

But the almost unbelievable inequality of wealth and income at the global level has striking effects on the consumption patterns see Chart 1. World Bank, World Development Index4, http: World Bank staff combined measures of inequality within countries with measures of inequality between countries using producer price parities to derive estimates of the share of consumption by world income deciles.

It should be kept in mind that this is not just an issue of the rich countries. When looked at from a global perspective, the poor become essentially irrelevant to the problem of resource use and pollution. The poorest 40 percent of people on Earth are estimated to consume less than 5 percent of natural resources. The poorest 20 percent, about 1. If somehow the poorest billion people disappeared tomorrow, it would have a barely noticeable effect on global natural resource use and pollution.

It is the poor countries, with high population growth, that have low per capita greenhouse gas emissions. Thus birth control programs in poor countries or other means to lower the population in these regions will do nothing to help deal with the great problems of global resource use and environmental destruction.

Because growing populations help stimulate economies and provide more profit opportunities, capitalist economies have significant problems when their populations do not grow, do not grow fast enough, or actually decline.

A growing population produces the need to build more housing, sell more furniture and household goods, cars, etc. Germany is an interesting example—its population has been shrinking since and its labor force has been decreasing slowly, reaching about 43 million people in You might ask, if zero population growth is so difficult for a capitalist economy, then why is Germany weathering the current economic crisis better than its European brethren?

It has had a positive current account balance for a decade, over the last eight years it has been greater than 4 percent of its GDP. Thus, through exports, an economy can grow even in the absence of the economic demand that would come from growing number of households. But this outlet of being a net exporter is not available to all countries practical problems make this so and it is also, of course, mathematically impossible for all countries to be net exporters.

And then what happens when labor shortages occur in Germany?


Labor can be imported. Germany in fact has relied heavily on imported labor, with some 4. Germany is now importing fully trained labor, mainly from the European Union. Without having to bear the costs of education and training, Germany is getting quite a bargain. A recent Los Angeles Times headline stated: With regard to the issue of Germany being a net exporter—clearly if some countries export more than they import there must be other countries that import more than they export.

Thus if population was to decline in all countries at the same time, neither of the avenues that Germany is pursuing—increasing net exports and importing labor as needed—can possibly be open to all countries simultaneously.

Although the German economy partly as a result of such means has done better than others in the European Union, there are many reasons to think that trouble lies ahead, and not only because of the recession that has engulfed Europe.

The German corporate sector has invested its more than ample profits, but it has done so outside the country. For historical and cultural reasons it is not as open to importing labor although it does import some as Germany. However, the stagnating economy has been kept afloat through exports and huge amounts of government deficit spending on infrastructure.

And there has been a close link between exports and GDP growth since Rapid population aging—due to low or no population growth—confronts many of the wealthy countries and some not-so-wealthy ones.

Capitalism is the underlying cause of the extraordinarily high rate of resource use, mismanagement of both renewable and nonrenewable resources, and pollution of the earth. Here, capital, labour and other drivers of economic growth are considered internal to the economic system.

relationship between population resources and infrastructure stocks

Application of endogenous growth models include work completed by BarroEasterly and RebeloDevarajan et al. Public capital investment is a necessary condition for growth to reach steady state - Irmen and Kuehneland an increase in investment as a share of GDP predicts a higher growth rate of output per worker, both temporarily, and in the steady state - Bond et al. Capital Accumulation and Growth: A New Look at the Empirical Evidence. Traditionally, growth theory assumes a balanced government budget, meaning that expenditures on public infrastructure are paid with tax revenues.

Heinemann ; Gong et al. Input-output models There are multiple sets of input-output IO multipliers available for use in analyses of the short-run impact of specific spending. The most popular measures provide local or county-level detail, and allow for large multi-sector analyses of geographic and regional impacts.

These multipliers are used primarily in local-focused studies, as seen in Krop et al. The academic literature on the use of input-output analysis to determine short-run impacts notes some points of caution. For example, Zaman et al. This is a major criticism of input-output models, and partially the reason why such findings can describe only the temporary impact of spending rather than the long-run permanent effects.

In light of these criticisms, it is apparent that input-output models cannot determine the permanent long-run effects of public infrastructure investment. However, these models are sometimes considered valuable to policymakers as a first step toward understanding these effects.

The shortcomings of input-output models in describing lasting and robust effects are best overcome by the long-run vector autoregression VAR approach discussed next. A VAR model is considered to be sufficiently able to account for the multiple feedback loops involved in public infrastructure spending, output, and GDP. The VAR approach assumes the relationships between variables are not based on economic theory but on their relational specificities and variables can be ordered in an ad hoc manner.

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In the VAR approach the modeller is required to identify the variables that are believed to be interacting in the economy and select a number of lags significant enough to capture the effects that the variables have on each other. Given that VAR does not depend on a fully specified structural model, it is suitable for examining the impulse responses of public capital in the economy without any preconceptions.

Since the VAR model specifies the correlations between realizations of the variables, it is natural and considered easy to use for forecasting purposes, with the knowledge of current and past values of the variables required. This is in contrast to other common econometric forecasting scenarios, where current values of other variables are included on the right-hand side of equations, meaning that before a one-period ahead forecast can be made, it is necessary to have the one-period ahead estimates for the other variables.

The higher the population concentration, the smaller the infrastructure network because the shorter is the average distance of the connections between people, goods and services necessary for engaging in economic and social activity. Australia has one of the most uneven population distributions in the OECD — most of the population is concentrated in a small number of large cities.

The lower the population concentration, that is, the more even the spread, the larger the infrastructure network because the longer is the average distance of the connections between people, goods and services necessary for engaging in economic and social activity.

With an index of 0. Even though Paris is a big city, a large proportion of the population is spread throughout the country. Chart 5 shows that for the OECD high-income group of countries, the greater the population concentration, the lower the infrastructure stock as proportion of GDP. OECD countries — relationship between geographic concentration of population and public infrastructure stock, Source: Groningen Growth and Development Centre data base was used for high-income countries based on GDP per capita in purchasing power parity terms.

While the relationship between concentration and public infrastructure is statistically significant, only about 20 per cent of the change in infrastructure stock can be explained by concentration. This indicates that there are other factors that contribute to the size of the infrastructure stock for any particular country.

Monthly Review | Global Resource Depletion

Thus these results should be regarded as indicative only and warrant further investigation. For example, population density within cities is likely to influence infrastructure stock as a proportion of GDP.

Calling on the discussion above, the population density of Paris is much higher than that of any city in Australia, and thus the infrastructure stock as a proportion of GDP would, all other things the same, be lower. This example brings out the point that countries with a small population such as Australia need not bear high infrastructure costs per capita where populations are agglomerated in a small number of large cities. In other words, to some degree, Australians have adapted economic activity to the geographic context of the continent.

The question for investigation is how well Australia has adapted to its geographic context. The qualifications to the above results run deeper than human geography. For example, in terms of physical geography, temperature variation, degree of undulation of the land, soil type, stability of the land mass and type of raw materials available for construction of infrastructure, all play an important role in determining the cost of infrastructure.

Some of the OECD countries have been excluded from Chart 5 because there is good reason to believe that these countries are some distance away from optimal investment levels and this would distort the results. Ireland is an outlier, and has been excluded from the scatter plot.

Despite low population concentration, the country has low infrastructure stock. Japan and New Zealand have by far the highest public infrastructure stock-to-GDP ratios, but have been excluded from the scatter plot.

relationship between population resources and infrastructure stocks

It is well known that the Japanese government repeatedly attempted in vain to reinvigorate the sluggish economy with the help of large public construction programmes. New Zealand undertook a major infrastructure programme over 15 years to the mids, thus the average age of the infrastructure stock is young and hence the capital stock value is high relative to other OECD countries.

New Zealand also over-provided infrastructure. Since the mids New Zealand has dropped back to low investment rates of between 2 to 3 per cent of GDP. The methodological approach for the cross-country OECD comparison above is replicated for the Australian states and territories in Chart 6.

The population concentration index was developed from data on statistical divisions. However, one state, Tasmania, is a stand out example of a population that is more evenly distributed than those of the other states and territories.

In comparing Tasmania with the other states and territories, Chart 6 highlights the additional expenditure on infrastructure associated with lower levels of population concentration, or with a population that is more evenly distributed. Australian States and Territories — relationship between geographic concentration of population and public infrastructure stock, Note: The capital stock to Gross State Product ratio of public infrastructure is highest for each state and territory in and falls tothe lowest point for each state and territory in the chart.

As mentioned in the previous section, Australia underwent a major expansion in infrastructure from World War II through to the s. In the early s there were concerns that much infrastructure installed during these earlier periods was reaching the end of its economic life and that Australia would undergo a massive asset replacement cycle at around the turn of the century that would place governments under considerable fiscal stress.

Economic impact of infrastructure investments across asset categories in Ontario |

These reports indicated an enormous replacement task for South Australia. While the asset replacement cycle did not materialise to the extent projected, in part as a result of technological change including the use of robots for the inner sleeving of water pipes, the report sounded an early warning signal relevant to all Australian governments of the importance of planning to overcome an anticipated increase in asset replacement.

Average age of infrastructure, to Source: Investment signals Proponents of the view that investment in public infrastructure is too low argue that increased investment would have positive spill-over effects on national productivity and growth. That is, there is a high social rate of return to public investment. Empirical work in the context of the United States by Aschauer and Mundell finds high pay-offs from investment in public infrastructure.

For Australia, this study finds that a one per cent increase in the stock of public infrastructure would increase output by about two thirds of one per cent.

  • Economic impact of infrastructure investments across asset categories in Ontario
  • Economic Roundup Summer 2007
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Critics of these studies argue that the estimates of the output response to public investment are implausibly high.