April 01, 2013 | Contribution by
Hallsworth Professor of International Macroeconomics and Development Economics
University of Manchester
The control room at the thermal power station at Takoradi, Ghana, June 21, 2006. Photo: Jonathan Ernst/World Bank
As policymakers in developing countries weigh policies to spur growth and reduce poverty, a big question is whether investing public capital in infrastructure should be a high priority? In a new book, "Public Capital, Growth and Welfare: Analytical Foundations for Public Policy," Pierre-Richard Agénor (Hallsworth Professor of International Macroeconomics and Development Economics, University of Manchester) argues that the answer is yes. He tells us that the key is factoring in externalities—that is, the benefits offered besides promoting markets and productions. These include better education and health, improved gender equality, and greater innovation. Moreover, a lack of access to infrastructure not only constrains the expansion of markets and private investment but may also hinder reaching health and education targets. Top policy measures should include more vocational training, labor market flexibility, and high-speed communications to promote competitiveness and force innovation.