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A Political Economy Model of Infrastructure Allocation: An Empirical Assessment

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

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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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
Date of revision:
Handle: RePEc:cpr:ceprdp:2336
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  1. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  5. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
  6. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
  7. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  8. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  9. Robert Eisner, 1991. "Infrastructure and regional economic performance: comment," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 47-58.
  10. 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.
  11. 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.
  12. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
  13. Negishi, Takashi, 1973. "The excess of public expenditures on industries," Journal of Public Economics, Elsevier, vol. 2(3), pages 231-240, July.
  14. repec:oup:qjecon:v:101:y:1986:i:1:p:1-31 is not listed on IDEAS
  15. Randall W. Eberts, 1990. "Public infrastructure and regional economic development," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 15-27.
  16. 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.
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