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Openness and Infrastructure Provision

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  • Ujjayant Chakravorty
  • Joy Mazumdar

Abstract

Casual 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 governments are likely to provide more infrastructure when the country is open to trade. Infrastructure provision is higher when the country trades with a less productive country or one bigger in size. The effects are more pronounced in the presence of producer lobbies, i.e., lobbying leads to greater infrastructure provision than under a social planner. These results suggest that the stock of infrastructure in a country may depend on its openness and the size and productivity of its trading partners. A simple cross-country regression provides support for our hypothesis that more openness leads to higher infrastructure provision. This connection between openness and infrastructure provision has largely been overlooked in the literature, but is important especially for developing countries, which have poor infrastructure but are in the beginning stages of trade and liberalization.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0312.

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Date of creation: May 2003
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Handle: RePEc:emo:wp2003:0312

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  1. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
  2. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  3. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  4. Röller, Lars-Hendrik & Waverman, Leonard, 2000. "Telecommunications Infrastructure And Economic Development: A Simultaneous Approach," CEPR Discussion Papers 2399, C.E.P.R. Discussion Papers.
  5. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  6. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  8. Conrad, Klaus & Seitz, Helmut, 1997. "Infrastructure provision and international market share rivalry," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 715-734, November.
  9. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
  10. Shang-Jin Wei, 2000. "Natural openness and good government," Policy Research Working Paper Series 2411, The World Bank.
  11. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
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