The net impacts of infrastructure disruption on the rest of the economy may be
estimated from both (1) the physical indirect effects caused by physical infrastructure systems failure in cascade and (2) indirect economic effects from loss in
production. Figure 2.1 gives a pictorial explanation of failures in infrastructure
services leading to economic impacts.
2.5.2 Achieving the Potential of Infrastructure Impacts
It has been mentioned in Chap. 1 that infrastructure is really better appreciated
through services generated rather than the physical structures, themselves.
However, these impacts on economic development depend on four conditions:
(1) investment in infrastructure should not remove resources away from other
(possibly more productive) investment. This means that resource allocation
should be efficient. This would depend on having the right macroeconomic
conditions.
Direct damage to
physical assets e.g
due to hurricane
Reduction in value of assets
e.g. Pylons, cables, pipes
Direct losses in Economic Output
caused by the event or hazard
e.g. No electricity to consumers
Cost of repairs
Indirect
losses in
Economic
Output
Resulting from primary loss in Economic
Activity
OUTSIDE event or hazard area
e.g. Industries not working from lack of
electricity
Resulting from indirect disruptions
OUTSIDE event or hazard area
e.g. No rail (electricity) transport
No electricity for pumping water
Fig. 2.1 Economic impacts resulting from infrastructure failure
2.5 Impact of Infrastructure on Economic Development
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