Economic growth and the dynamic interplay of transport, ICT, FDI, and urbanization: Global evidence and implications for Latin America

Abstract

This study examines the interdependent effects of transport infrastructure, ICT, FDI, and urbanization on economic growth, with particular emphasis on Latin American countries. Using a dynamic panel of 63 countries from 2000 to 2021, we estimate a system of simultaneous equations via the GMM to capture direct, indirect, and bidirectional relationships. To contextualize the findings and account for structural heterogeneity, a second econometric analysis is conducted on a subsample of 14 Latin American countries, selected to reflect the region’s specific spatial and developmental characteristics. The empirical results underscore the central role of transport infrastructure in driving growth, especially in the Latin American context, where it exerts robust and statistically significant effects on GDP per capita (0.0385, p < 0.05), FDI (2.7489, p < 0.05), ICT (1.9904, p < 0.01), and urbanization (0.3113, p < 0.01). These findings demonstrate the multidimensional function of multimodal connectivity as a platform for inclusive development and position the study as a novel empirical contribution to the field of transportation economics. Similar dynamics are observed globally, reinforcing the enabling role of transport in fostering capital mobility, digital diffusion, and spatial integration. In parallel, ICT and FDI emerge as key drivers of economic performance. ICT significantly enhances GDP and FDI in Latin America (0.3896, p < 0.01), although it is negatively associated with FDI at the global level (–1.7179, p < 0.01), suggesting distinct regional trajectories. FDI itself has a consistently positive impact on GDP per capita across both samples, with a stronger magnitude observed in Latin American countries (0.0269, p < 0.01) compared to the global average (0.0007, p < 0.01). In contrast, the effects of urbanization diverge sharply from conventional expectations: rather than contributing positively to growth and investment, urbanization in Latin American countries is associated with significant negative effects on GDP per capita (–1.7713, p < 0.01) and FDI (–10.3693, p < 0.01). This counterintuitive outcome is likely explained by persistent structural constraints, including spatial inequality, underdeveloped infrastructure, and high levels of informality, which hinder the realization of agglomeration economies. Nonetheless, urbanization remains positively linked to ICT development (0.8015, p < 0.01) and transport infrastructure (0.0601, p < 0.05), indicating a more complex and context-specific role in shaping connectivity and innovation capacity. Finally, a range of control variables, including trade openness, industrialization, government expenditure, population growth, population density, and informality, also significantly influence outcomes, underscoring the importance of structural conditions in mediating development processes. Taken together, the study provides new region-specific empirical insights to inform integrated infrastructure and digital transformation strategies aimed at fostering inclusive and sustainable growth in Latin American countries.