What Drives Infrastructure Spending in Cities of Developing Countries?

Abstract

There exists a dearth of empirical studies on what determines infrastructure spending in cities of developing countries. This in part can be attributed to the absence of quality data and the tendency for researchers to gloss over variations in infrastructure expenditure in or across developing world cities in the general belief that investment in infrastructure is generally low. Using the United Nations Human Settlements Programme's global urban indicators database, this paper examines variations in infrastructure spending across cities in developing countries with a view to identifying the factors that explain these differences. The empirical analysis identifies substantial intercity variations in infrastructure spending both across and within the regions of Africa, Asia, the Middle East, Latin America and the Caribbean, and the economies in transition. Further analysis suggests that intercity variations in infrastructure spending are accounted for by differences in the macroeconomic environment, urban growth rate, quality of governance and financial capacity of municipal governments.