Openness, Lobbying, and Provision of Infrastructure
AbstractCasual empirical evidence suggests that infrastructure provision is higher in economies that are open to world trade. We develop a model of imperfect competition to show that open economies are likely to provide more infrastructure than closed economies. If infrastructure is financed by taxing a producer lobby, the open economy will overprovide while the closed economy will underinvest; an open economy approaches optimal provision when this lobby group is small in size. If financing of infrastructure is done by taxing the whole population, the closed-economy outcome may be preferred relative to that of the open economy.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 74 (2008)
Issue (Month): 4 (April)
Find related papers by JEL classification:
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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