Does the Bon curve apply to infrastructure markets?

Bon (1992) argues that construction demand is low where economies have yet to expand. During their expansion phase, the growth in construction outstrips the rest of the economy and therefore increases as a share of GDP. As the economy approaches maturity, the rate of increase in construction slows and as a result the proportion of GDP taken up by construction declines. While this may indeed be the case for construction activity as a whole, it would appear that at least one submarket within the construction sector does not follow that pattern. Infrastructure output may be seen as continuing to increase more rapidly than GDP regardless of the state of maturity of the economy. This may be because as the economy grows, more infrastructure is required to support ever more sophisticated requirements such as rapid movement of goods, increased volume of traffic and greater expectations and use of quality urban environments as commuters increase their demands for rapid transit and improved quality of life. Using a model of infrastructure based on infrastructure as a share of construction output in the UK, infrastructure in all countries was estimated. This enabled a comparison of infrastructure in the different countries to be compared. This was used to show the relationship between infrastructure as a percentage of GDP and the level of income per head. While both low and high income countries tend to have low levels of spending on infrastructure, the majority of countries in the mid range of income tend to have a wide range of infrastructure to GDP, with no particular pattern. These results may have implications for interpreting the Bon curve. Indeed, the current call for investment in infrastructure even at a time of recession is witness to the ever increasing demand for roads, rail, air, communication, water and sewage services, and energy even in relatively wealthy economies.