The Externalities of Infrastructure Investment

In this paper, I analyze the relationship between infrastructure investment, environmental degradation and.I first present their theoretical link through the lens of the theory of externalities; in particular, investment in infrastructure is associated with a positive externality since infrastructure is a public good, but both the usage and the construction of infrastructure pose negative environmental externalities.I synthesize the relatively disparate literature on this topic, before jointly estimating these externalities using cross-country data.I find that a 1% increase in infrastructure investments is associated with a 1.04% increase in average GDP, and a 0.77% increase in greenhouse gas (GHGs) emissions.I find that a 1% higher tax rate on energy dampens the association of such investments on GHGs.