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This paper seeks to assess the extent to which a country's overall level of development and that of its financial sector, in particular, are factors that attract private capital into infrastructure projects. The authors investigate these effects in a 1990-2007 dataset on the power sector in 37 developing countries. The results suggest that economic growth is a key determinant of private investors' investment in infrastructure projects, and that investors tend to take countries' governance quality into account in their decisions to invest. The empirical results highlight that the development of the financial sector also plays a significant role in private investors' decisions to enter infrastructure sectors.
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