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10/23/2017  

Definition

Generally an infrastructure asset can be identified based on common physical characteristics as follows:

 

  • Large scale object which is characterized by a physical network and hence a capital good which is not consumed directly but rather a source of services (e.g. grid network, pipelines, roads, bridges, tunnels, harbors, airports, etc.)
  • Long lasting which has major implications with respect to the financing and the valuation of infrastructure assets. Infrastructure facilities are typically installed with a long-term service horizon and exhibit comparatively low technological risk which implies long investment horizons
  • Space and use specific since infrastructure assets are generally immobile and the dimension of the infrastructure facility is specified by geography, demography and the specific level of demand. The combination of the long-term life spans and the fact that infrastructure assets are immobile implies that infrastructure shapes the economic geography of a state, region or even a country. In addition infrastructure is generally use-specific which implies that it cannot switch to another function
  • Lumpy rather than incremental since adjustments in supply and demand are difficult since lag times in construction are long. Infrastructure projects are typically large scale projects with a comparatively long planning and implementation phase
  • Increasing both welfare and aggregate output since infrastructure facilities provide basic goods and services needed for any kind of productive processes. Moreover these goods and services are consumed by both households and enterprises. Accordingly output pricing and continuity of supply are of strategic importance in public policy and political terms

 

 


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