Financing infrastructure in developing countries

Antonio Estache (1) , Tomas Serebrisky (2) , Liam Wren-Lewis (3, 4)

1 ECARES - European Center for Advanced Research in Economics and Statistics
2 Inter-American Development Bank
3 PSE - Paris-Jourdan Sciences Economiques
4 PSE - Paris School of Economics

This article develops a theoretical framework to analyse options for financing infrastructure in developing countries. We build a basic model that gives motivations for using a combination of public finance, private debt, and private equity. The model is then extended in a number of ways to examine factors that are important for developing countries. We focus in particular on key institutional weaknesses that are often important for infrastructure investment. Overall, we show that such weaknesses can be key in determining financing choices, but that they do not all push in the same direction. Financing schemes must therefore be adapted to consider the institutional limitations that are most pertinent in any given context.

Keywords: finance; development; infrastructure

Domains: Economics and Finance

Antonio Estache, Tomas Serebrisky, Liam Wren-Lewis. Financing infrastructure in developing countries. Oxford Review of Economic Policy, 2015, 31 (3-4), pp.279-304. ⟨10.1093/oxrep/grv037⟩. ⟨halshs-01245625⟩