[amor de cosmos]

haven't read it yet, but it's sort of a continuation of another good paper on this sort of thing (this one (http://www.statcan.gc.ca/daily-quotidien/080415/dq080415b-eng.htm)) that Ryan MacDonald, one of the authors of this paper, also wrote. I say let's get building! :P

Study: Impact of public infrastructure on productivity
1962 to 2006

Between 1962 and 2006, roughly one-half of the total growth in multifactor productivity in the private sector was the result of growth in public infrastructure.

Public capital (the nation's roads, bridges, sewer systems and water treatment systems) constitutes a vital input for private sector production. It enables concentrations of economic resources and provides wider and deeper markets for output and employment.

The contribution of public infrastructure to productivity growth has not been constant over time. The largest contributions to productivity growth occurred during the 1960s and early 1970s, when it contributed up to 0.4 percentage points to average annual productivity growth.

During the 1980s and 1990s, its contribution to productivity averaged only 0.1 percentage points a year. The slower growth in the stock of public capital after 1980 occurred as decades of cross-country highway expansion came to an end.

Analysts studying productivity growth have long been faced with the problem of explaining why growth was much higher before 1980 than afterwards. A substantial portion of the difference came from the much higher growth in public infrastructure in the period preceding 1980.

In its analysis, the paper used earlier research that estimated the rate of return to public infrastructure as the impact on private sector costs. It found that the rate centred on 17%. The paper also examined how robust the results were to alternate estimates of the rate of return. To do so, it used a range of estimates of the impact of public capital on private sector costs. All produced results indicating that public capital made a significant contribution to productivity growth.
http://www.statcan.gc.ca/daily-quotidien/090114/dq090114a-eng.htm

Infrastructure spending linked to productivity: StatsCan
The Canadian Press
January 14, 2009 at 9:09 AM EST

OTTAWA — A new study suggests the federal strategy of responding to troubled economic times by fixing the country's crumbling infrastructure is cost-effective.

Analysts have long contemplated why productivity growth was much higher before 1980 than afterward.

The new study by Statistics Canada says a substantial portion of the difference came from the much higher growth in public infrastructure before 1980.

The agency says roughly half of the total growth in multifactor productivity in the private sector between 1962 and 2006 was the result of growth in public infrastructure such as roads, bridges, sewer systems and water treatment systems.

The study found the largest contributions to productivity growth occurred during the 1960s and early 1970s, when infrastructure contributed up to 0.4 percentage points to average annual productivity growth.

Its contribution to productivity averaged only 0.1 percentage points a year during the 1980s and 1990s, as decades of cross-country highway expansion came to an end.

StatsCan says public capital enables concentrations of economic resources and provides wider and deeper markets for output and employment.
http://business.theglobeandmail.com/servlet/story/RTGAM.20090114.wcdninfrastructure0114/BNStory/Business

[caltrane74]

This is the best type of government spending, it increases the weath and productivity of the nation.

[amor de cosmos]

If we have ever budget surpluses some, or all, could be spent on infrastructure. that's what Japan did. :tup:

[habfanman]

I've never understood why we ignore infrastructure spending when times are good. We always wait until there's an economic downturn. Strange.

[wild wild west]

I've never understood why we ignore infrastructure spending when times are good. We always wait until there's an economic downturn. Strange.

Well, part of it (I suspect) is that construction costs tend to be higher, and skilled labour harder to come by, in good times.

Also, in Alberta at least they spent tons of money on infrastructure during the boom years - Calgary and Edmonton ring roads, LRT extensions, hospital expansions and the new South Calgary Hospital, and many new buildings at the U of A and U of C just to name some of the biggest ones.

[Coldrsx]

I've never understood why we ignore infrastructure spending when times are good. We always wait until there's an economic downturn. Strange.

As WWW said...

Comes down to Macro Economics basically... and supply and demand. Governments are there to keep growth stable, positive, and orderly. They can become more transparent economically with a strong private led economy, but need to step in with measures or controls once it loses steam. They become the clients, the developers, the lenders...

Why do you think in the great depression there were so many publicly funded major infrastructure projects.

[Xelebes]

I've never understood why we ignore infrastructure spending when times are good. We always wait until there's an economic downturn. Strange.

Because good times indicate current infrastructure is sufficient to address the needs that we only need to add on to it. Downtimes indicate the infrastructure is lacking or not stimulating growth.

[amor de cosmos]

Here's Canwest's coverage; Eric Beauchesne always finds good stuff:

Infrastructure feeds productivity: StatsCan
By Eric Beauchesne, Canwest News Service
January 14, 2009

OTTAWA — The case for including infrastructure spending in the Jan. 27 federal budget's fiscal stimulus package got a big boost Wednesday from a Statistics Canada report stating that half the private-sector productivity gains over the past half century have come from investments in the nation's public infrastructure.

"Between 1962 and 2006, roughly one-half of the total growth in multifactor productivity in the private sector was the result of growth in public infrastructure," the federal agency said in releasing a study which looked at the contribution of improvements in public infrastructure, such roads, bridges, sewer systems, and water-treatment systems, to increases in its broadest measure of productivity.

Multifactor productivity measures the efficiency with which both capital and labour are used in production, and is often associated with technological or organizational changes. It is a broader and more complex measure of efficiency than commonly cited labour productivity, which measures the value of output per hour worked.

"Public capital constitutes a vital input for private-sector production," it noted. "It enables concentrations of economic resources and provides wider and deeper markets for output and employment."

It also found there is a 17 per cent return on such spending, which one labour economist noted "far exceeds the low cost of public borrowing" needed to finance such investments.

United Steelworkers economist Erin Weir said the study "confirms that greater investment in public infrastructure would not only provide short-term economic stimulus, but also contribute substantially to long-term productivity growth.

"Investments to reduce carbon emissions, such as renewable power, public transit, building retrofits and carbon-capture technology, leap to mind as worthwhile public projects that could be undertaken."

Prime Minister Stephen Harper and Finance Minister Jim Flaherty have repeatedly indicated that infrastructure spending, along with tax cuts, will be key measures in a budget stimulus package that Harper has said could be worth $30 billion.

"An additional bonus of this type of spending is that it reduces congestion and travel time for individuals, a benefit that is not captured in conventional productivity estimates," added economist Andrew Sharpe, head of the Centre for the Study of Living Standards, who noted that highways and bridges account for much of public infrastructure.

"If the public infrastructure is not needed, there is of course no effect of additional infrastructure spending on productivity," Sharpe said. "But if there are public infrastructure gaps, as appears to currently be the case in Canada, public infrastructure spending that fills these gaps can have a significant positive effect on Canada's lagging business-sector productivity growth."

Supporting that view, the Federation of Canadian Municipalities released a list of more than 1,000 municipal infrastructure projects worth nearly $14 billion that are "shovel ready" for job creation from coast to coast.

Concerns, however, have been expressed that a massive infrastructure program could result in shortages in workers and materials, bottlenecks that would reduce the stimulus they would provide to the struggling economy, while also fuelling inflation pressures.

The Statistics Canada study found that the largest contributions to productivity growth from investments in public infrastructure occurred during the 1960s and early 1970s, when they added up to 0.4 percentage points to average annual productivity growth. However, during the 1980s and 1990s, its contribution to productivity averaged only 0.1 percentage points a year.

Part of the growth in productivity in the earlier period came from the very substantial growth in public infrastructure, especially highway construction, it observed.

"The slowdown in public-capital investment occurred as decades of cross-country highway expansion came to an end and scheduled projects came to a conclusions," it said. "The investment opportunities for the public sector were lessened as a result, leading to a natural decline in public-sector investment."

The report cautioned that "is not possible to infer" from the findings that the slowdown in productivity growth that followed was related to the slowdown in investment in public infrastructure. The magnitude of the average contribution of public capital to labour-productivity growth varies, it also noted.

"However, the conclusion that public capital makes an important contribution to productivity growth remains unchanged," it said.
http://www.vancouversun.com/business/story.html?id=1176608

[caltrane74]

Some new directives regarding Monetary Policy could also be beneficial in keeping us on an even economic keel.

- BOC lending to the banks and the the Government could keep the cash flowing freely during the economic crisis, and tied in with extremely low interest rates and higher gov't spending, we'll come out of this far better than the United States.

Spending on infrastructure will increase our productivty when we get out of this recession. - New Highways, better public transpo, green tech, high tech and a more efficent telecommunications network will be of great benefit to all Canadians.

[habfanman]

I'm thinking more along the lines of basic existing infrastructure: sewers, roads, bridges, water treatment facilities etc. Items such as these don't stop aging while the economy is booming. Unfortunately, they aren't sexy and they don't provide great 'skyline enhancements', which is probably why they are so often ignored. It's much cheaper to maintain them on a regular basis than to wait for a catastrophic failure, be it physical or economic.

As for public transport, it would make more sense to be in a state of permanent expansion; add a station or 2 every year to subways for example, than our current system of building a mega-project, waiting 15 years, then scrambling to build the next mega-project. This only ensures that we're always at least 3 mega-projects behind what is actually needed. By providing stable transit planning, growth could be guided along transitways rather than having transit continually trying (and failing) to keep up with uncontrolled growth.

There's a serious lack of long-term thinking accross the country.

This article is from 2007 and appeared in 6 major dailies:

http://www.canada.com/montrealgazette/story.html?id=c0498b19-c460-4fa0-8767-6b272ff56348

Canada's infrastructure needs urgent attention: experts

Charles Mandel , CanWest News Service
Published: Thursday, August 02 2007

Infrastructure such as roads, sewers and bridges is something people pay little attention to - until it fails. Following the bridge collapse Wednesday in Minneapolis and a similar one in Quebec last year, Canadians have every right to worry.
Bridges in Canada have reached 49 per cent of their useful life, according to a 2006 Statistics Canada study, and experts warn our country's roads, wastewater plants and other infrastructure isn't in any better shape.
Saeed Mirza, a professor of civil engineering at Montreal's McGill University and a nationally recognized expert on infrastructure, calls the state of Canada's infrastructure disastrous and warned that more bridge collapses and other failures could be on the way.

"If we do not maintain our infrastructure, do not upgrade it, we'll continue to have spectacular collapses,'' Mirza said.
According to a recent study Mirza completed for the Federation of Canadian Municipalities (FCM), based on present estimates, Canada needs $100 billion to upgrade its roads, bridges, sewer plants and other vital infrastructure.
In the 2006 budget, the federal government allocated $16.5 billion to infrastructure over the next four years.
A Statistics Canada study examining the age of infrastructure in Canada cited wastewater treatment facilities as the oldest, with 63 per cent of their useful life behind them in 2003. Roads and highways had reached 59 per cent of their useful life, and sewer systems 52 per cent.
Canada doesn't maintain a complete inventory of infrastructure facilities in every community, something that Mirza said is a problem. "If we don't have that, forget about knowing about the existing state of health or condition of the facility. These are the kinds of things we have to undertake almost immediately and we're not doing it."
Zoubir Lounis, head of the concrete structure research group for the National Research Council in Ottawa, said Canada has a lot of bridges built between the 1950s and the '70s which are now nearing the end of their life. Bridges built during that period were constructed to last 50 years.
"We cannot wait until a crisis comes,'' Lounis said. "We have to invest. Infrastructure is critical to our well-being, our economy. It's not some luxury thing."
Most bridges receive visual inspections every two years, but Lounis said that's not enough. X-rays and ultrasounds are the only way to detect small cracks and metal fatigue, however, the cost of carrying out such detailed inspections on major spans can run into the hundreds of thousands of dollars leading transport ministries to shy away from such techniques.
Still, Lounis said it's vital to target bridges that may be suspect because of their age, their condition or from the volume of traffic traveling over them. The engineer said it's important that a priority system for inspection be developed, otherwise "there may be problems with the risk of catastrophic failure."
At a news conference Thursday morning, Montreal Mayor Gerald Tremblay announced a 1938 overpass in that city would be demolished and rebuilt as soon as possible. Tremblay said the city wants to avoid bridge collapses such as Wednesday's in Minneapolis and an overpass collapse in 2006 in Laval, Que., which killed five people.
But Ron Sexsmith, a professor emeritus of civil engineering at the University of British Columbia in Vancouver, said people shouldn't be overly worried about being caught on a collapsing bridge or in some sort of other infrastructure failure.
"There are many other hazards in life,'' he said. "If I was a betting person, I'd bet we'd see something fall down in the next 10 or 20 years. The chance of it being a major bridge, I think, is extremely small, but things do happen."
It's not just bridges in need of repair. The struggle to deal with aging infrastructure extends across Canada, even to the wealthiest jurisdictions. In its 2005-06 annual report, Alberta Infrastructure and Transportation noted 8,100 kilometres of provincial highway needs rehabilitation or reconstruction.
For its part, Ontario announced a $30-billion, five-year strategic plan in 2005 to upgrade its infrastructure.
In its 2006 submission to the federal government on funding support for infrastructure, the FCM said the municipal infrastructure deficit increases by $2 billion annually.
"The consequences of this deficit are evident in every community: potholes and rusting bridges, water treatment and transit systems that cannot keep up with demand, gridlock, poor air quality and a lack of affordable housing,'' cited the report.
The report said most municipalities are reaching an infrastructure "breaking point" and noted that between 1961 and 2002 the amount of infrastructure controlled by the federal government in relation to municipal governments had undergone a striking reversal.
During that period, the federal government's share of infrastructure maintenance dropped from 23.9 per cent to 6.8 per cent.