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A Political Economy Model of Infrastructure Allocation: An Empirical Assessment

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  • Cadot, Olivier
  • Röller, Lars-Hendrik
  • Stephan, Andreas

Abstract

This paper proposes a simultaneous-equation approach to the estimation of the contribution of transport infrastructure accumulation to regional growth. We model explicitly the political-economy process driving infrastructure investments; in doing so, we eliminate a potential source of bias in production-function estimates and generate testable hypotheses on the forces that shape infrastructure policy. Our empirical findings on a panel of France's regions over 1985-91 suggest that influence activities were, indeed, significant determinants of the cross-regional allocation of transportation infrastructure investments. Moreover, we find little evidence of concern for the maximization of economic returns to infrastructure spending, even after controlling for pork-barrel and when imposing an exogenous preference for convergence in regional productivity levels.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2336.

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Date of creation: Dec 1999
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Handle: RePEc:cpr:ceprdp:2336

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Keywords: France; Growth; Infrastructure; Lobbying; Political Economy;

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  1. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1841, C.E.P.R. Discussion Papers.
  2. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  3. Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 69-112.
  4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  5. Robert Eisner, 1991. "Infrastructure and regional economic performance: comment," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 47-58.
  6. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  7. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  8. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  9. Negishi, Takashi, 1973. "The excess of public expenditures on industries," Journal of Public Economics, Elsevier, vol. 2(3), pages 231-240, July.
  10. Sandmo, Agnar, 1972. "Optimality rules for the provision of collective factors of production," Journal of Public Economics, Elsevier, vol. 1(1), pages 149-157, April.
  11. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers, C.E.P.R. Discussion Papers 909, C.E.P.R. Discussion Papers.
  12. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, Econometric Society, vol. 54(4), pages 923-42, July.
  13. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(1), pages 1-31, February.
  14. White, Kenneth J, 1992. "The Durbin-Watson Test for Autocorrelation in Nonlinear Models," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 370-73, May.
  15. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  16. Randall W. Eberts, 1990. "Public infrastructure and regional economic development," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 15-27.
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