The infrastructure dividend: conceptualising and quantifying the cost of providing capacity for additional people

Jane O'Sullivan, University of Queensland

The cost of providing physical capital for additional people has been largely neglected as an impact of population growth due to the lack of precise quantification of the burden. This paper discusses the application of a novel technique, which has been used to quantify the burden for Australia and the UK, to rapidly growing nations in sub-Saharan Africa. By estimating the turnover rate of different classes of assets, the actual expenditure on durable assets (infrastructure, equipment and higher level training) may be attributed to either turnover or expansion of capacity. Requiring around 7% of GDP per 1% population growth rate, expansion is a debilitating drain on the saving capacity of rapidly growing nations. Its alleviation through fertility reduction constitutes the “infrastructure dividend,” which supplements and may surpass the demographic dividend in stimulating economic development. These insights encourage a re-evaluation of the role of population growth reduction in economic development.