Question

What would be the growth status of industry if infrastructure is not developed ?

Answer 1

Any modern textbook on industrial

economics or industrial organization will

point out that for industries that enjoy

network externalities, the social rate of

return has to be higher than the private rate

of return in these projects—assuming that

the regulation does not allow the network

externality to be turned into a private rent.

In other words, their impact on GDP and its

growth should be high.

This explains for instance why the

growth impact of the telecoms sector so

often come out to be high. But for specific

countries or regions, this could also be true

for transport or electricity. In general,

however, all infrastructure subsectors can

be good examples of sectors in which such

network externalities can matter. Their

social return will however evolve with time,

with stock size and with market size. This

section reviews the main lessons available

on each subsector on the growth impact of

each infrastructure subsector.

Answer 2

Network externalities are enjoyed by many industries in which the rate of return is seemingly more than the rate of return privately.

Through this, it can be assumed that the network externality is not allowed by the regulation that can be converted into a private rent resulting in a greater GDP.

Thus if industry infrastructure is not developed, the growth status of the industry would be the one mentioned above.