American Economic Association

Annual World Bank Conference on Development Economics: Global 2007: RethinkingInfrastructure for Development by François Bourguignon; Boris PleskovicReview by: Taryn DinkelmanJournal of Economic Literature, Vol. 46, No. 4 (Dec., 2008), pp. 1021-1022Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/27647098 .

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Book Reviews 1021

In the interest of providing analytical solutions, some

complex situations require simplification such as the assumptions of exponential survival

or log utility. It would be useful to know how

important the simplifications are. For example,

with constant relative risk aversion utility, the

sign of the response can be different when risk

aversion is greater than one rather than less than

one, with log utility being a

special case. A related

comment is that where the sign of an effect

depends on the magnitude of a parameter (as in

the case of CRRA utility) it would help the reader to be given some guidance as to the likely range of values with reference to the literature.

Why do people not purchase private annui

ties? The book provides clear theoretical analy ses of the basic annuity model with important real-world extensions, especially adverse selec

tion. However, the empirical literature suggests that adverse selection is not sufficient to explain the lack of purchasing: in spite of the higher price due to adverse selection, there is still a

utility gain because of the value of the longev

ity insurance. Uncertainty about future health

care expenses and long-term care expenses seems like a

plausible explanation, but the book

provides no guidance about whether the effect

could be quantitatively large enough. An issue

not mentioned is whether the annuity is guar anteed. A sixty-five-year old gives a substantial

amount of money to an insurance company: will that company be solvent and able to pay in

twenty-five years? This worry has foundation.

Here is a quotation from Wikipedia concerning

Equitable Life: "The Equitable Life Assurance

Society (Equitable Life), founded 1762, is a life insurance company in the United Kingdom. It

almost collapsed in 2000 and had to cut the pen sions and retirement savings of its policyholders to remain afloat, causing a

large public outcry"

(http://en.wikipedia.org/wiki/ The_Equitable_Life_Assurance_Society).

If concern about the possible failure of insur

ance companies keeps people from annuitizing, the solution may require public policy in the form

of publically provided annuity insurance. Such

insurance would lessen the distinction between

private accounts and Social Security. Michael Hurd

RAND and NRER

H Public Economies

Annual World Rank Conference on Development Economics?Global 2007: Rethinking Infra structure for Development. Edited by Fran?ois

Bourguignon and Boris Pleskovic. Washington, D.C.: World Bank, 2008. Pp. vii, 285. $24.00,

paper. ISBN 978-0-8213-6841-1.

JEL 2008-0462

Funding the postwar reconstruction of

European economies was one of the historical

responsibilities of the World Bank. These respon sibilities shifted in the decades following the birth of the World Bank, even though the importance of infrastructure remained central for many devel

oping countries. It is fitting, therefore, that the

May 2006 Global Annual World Bank Conference on

Development Economics (ABCDE) marked a

return to serious consideration of the role of infra

structure in economic development. Jointly orga nized by the World Bank and the Government of Japan, the conference produced

a series of

six papers that appear in this volume, along with

discussant comments. Rather than collecting

together research papers that provide quantitative estimates of the effects of infrastructure (the field

is too large for this to be done in a single book), the edited volume presents a broad overview of

the challenges and opportunities related to rolling out basic infrastructure in developing economies.

In addition, several of the opening remarks and

keynote addresses (included in the volume) high

light the importance of considering infrastructure

needs and bottlenecks to provision in Africa, the

continent that lags furthest behind in existing infrastructure stocks.

Antonio Estache contributes a key first paper

that discusses the general state of knowledge in the field. He provides a clear discussion of

the history of infrastructure financing over the

last fifteen years, the research on macro- and

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1022 Journal of Economie Literature, Vol. XLVI (December 2008)

microeconomics impacts of infrastructure (there

is substantially more macroeconomic evidence

than microeconomic evidence), the effects of

infrastructure on the poor (regulatory reform

improves access but services do not necessar

ily reach the poorest in the absence of targeted

subsidies), and a detailed analysis of research into

corruption in the infrastructure sector. His paper

highlights the general difficulties in measuring the impact of infrastructure and in designing

appropriate financing regimes and governance structures to expand infrastructure stocks in an

efficient and equitable manner.

The issues raised in this chapter are echoed in

the five remaining chapters. The topic-specific

chapters cover crucial links between the lock

in effects of infrastructure choice and climate

change (two chapters), the importance of rural

infrastructure for agricultural development (two

chapters) with a focus on the Japanese experience, and the issue of cross-border and regional coop eration in infrastructure provision in the presence of significant cross-national externalities (the

final chapter). The authors of each of these chap ters introduce nonexperts to the issues that arise

when countries must prioritize infrastructure

expansion by type and technology, choose how

to finance expenditure for initial investment and

maintenance, and design effective institutions of

governance for service-providing entities.

The book is a valuable read for those looking for a brief but encompassing introduction to the chal

lenges involved in thinking about infrastructure

for development. I take two specific messages

away from this book, which are at once disap

pointing and motivating. The first message is that

it is methodologically difficult to accurately esti

mate the impact of infrastructure on economic

outcomes because of the nature of the invest

ment process and the nature of infrastructure

itself. Despite the enormous amount of research

that has been done on infrastructure across a

range of economic and noneconomic disciplines, Estache notes that "there is still great uncertainty over how, and how much, infrastructure affects

growth" (p. 48). This is for reasons related to

the politics and practicalities of building infra

structure as well as to the specifics of what infra

structure does?it often has significant spillover effects within and across countries, generates

general equilibrium effects and affects economic

outcomes over very long time periods. The second message is that if we are to have

any hope of optimally using resources for infra

structure expansion?and the resource needs

are large:

one of the contributors notes that the

poorest countries must annually spend 9 percent of GDP on maintenance and expansion of infra

structure to attain the Millenium Development Goals?it behooves us to apply

our best research

minds to getting good estimates of the quantita tive and causal relationships between infrastruc

ture and development outcomes. Development economists studying infrastructure at both the

micro and macro levels should take heart in the

fact that we used to think it was impossible to

tease out causal relationships between health and

economic outcomes. In many cases, these rela

tionships are

complicated by some of the same

features as infrastructure: for example, spillovers in health, general equilibrium effects of poor health at the population level, and the long-term effects of health. However, with new

approaches to research design (field experiments, panel data

methods, innovative instrumental variable meth

ods), we have gained more confidence in the

quantitative evidence for some of these relation

ships. The latest World Bank ABCDE conference volume leaves us with the sense that there is still

much work to be done in teasing out relationships between infrastructure and development, but

that it is important work which requires our dedi

cated attention.

Taryn Dinkelman

Princeton University

J Labor and Demographic Economics

The Price of Independence: The Economics of

Early Adulthood. Edited by Sheldon Danziger and Cecilia Elena Rouse. John D. and Catherine

T. MacArthur Foundation Series on the

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