Population Density, Optimal Infrastructure and Economic Growth

This paper develops an OLG model with endogenous fertility and education decisions to analyze the impact of transportation infrastructure on economic growth. The study argues that there is an optimal distribution of infrastructure in the region to boost the transition of an economy from economic stagnation towards the developing phase. The study assumes that the population induced productivity improvements and provision of optimal infrastructure in the region will form the two necessary conditions for this transition. Population mobility plays important role in efficient allocation of labor resources and hence explains economic growth. At macro-economic level, the model proposes simpler micro-foundations of the geographical interpretations of economic growth in order to study the effect of population density on growth. Using time series data for years 1961-2012 on India, the study examines the role of dense population and transportation infrastructure on economic growth. Empirical analysis conducted in this study confirms causal impact of population density, and profitability of the infrastructure providing facility on economic growth