This study investigates the impact of public investment in infrastructure into private capital formation and economic growth in Tanzania using time series data over thirty years’ period (1990-2020) and applying vector autoregressive (VAR) model. The findings show that increasing public investment in infrastructure negatively affects private capital formation in the short run due to the dominance of the crowding-out effect. However, the effect turns positive and significant in the medium term due to the dominance of crowding-in effect; but are short-lived as they die in the long term. The impact of increased public capital stock in infrastructure on private capital stock is positive, implying both private capital formation and private capital stock positively affect real GDP growth, implying crowding-in effects of public capital stock in infrastructure, and the complementarity effect between the two. The low magnitude and short-lived effects are reflective of the unfavorable environment for private investment in Tanzania.

In India, there is significant divergence in industrial performance across states, especially after the economic reforms. In this context, this study analyses manufacturing performance at the sub-national level and the role of the state therein. The changing role of the state is particularly important considering the policy shift towards a market-led economy. This study focuses on the role of public infrastructure in explaining the divergence in manufacturing performance.

Public infrastructure is a multidimensional concept, and we constructed three sub-indices physical, social, and financial infrastructure to measure its impact on manufacturing performance. The study considers only the registered manufacturing sector and 16 major states in India due to their significant contribution to manufacturing value added. Panel regression techniques were used for the econometric analysis, highlighting significant disparities in both physical and social infrastructure across states. The study found that regional disparities in infrastructure availability are a major determinant of manufacturing disparity across Indian states.

We develop a novel quantitative spatial equilibrium model that endogenizes the government’s decision to invest in transport and electricity networks. Electricity quality influences local sectoral productivities, while road quality affects trade costs. We show that network complementarities in general equilibrium are primarily shaped by trade routes and the elasticity of substitution between consumption products. Our calibrated model for the Brazilian economy indicates significant welfare gains from reallocating infrastructure investment, with spatial complementarities in heterogeneous infrastructure provision accounting for a substantial portion of these gains. Our results demonstrate that lack of coordination and budget sharing between different line ministries are important sources of misallocation.