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International Aspects of Public Infrastructure Investment

  • Spiros Bougheas
  • Panicos O. Demetriades

    ()

  • Edgar L. W. Morgenroth

Modelling infrastructure as an international public good in a two-country model of trade where each country’s social planner behaves strategically, we show that the equilibrium levels of infrastructure are sub-optimal from a global perspective. Utilising an appropriate econometric framework and data from 16 European countries over the period 1987-95, we find evidence that accords well with the main predictions of our theory. Thus, we are able to offer a plausible theoretical explanation why public capital may be undersupplied, as suggested by previous empirical literature.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/econ01-4.pdf
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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 01/4.

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Date of creation: Jun 2001
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Handle: RePEc:lec:leecon:01/4
Contact details of provider: Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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  1. Nadiri, M Ishaq & Mamuneas, Theofanis P, 1994. "The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 22-37, February.
  2. David A. Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25.
  3. Bond, Eric W., 1997. "Transportation infrastructure investments and regional trade liberalization," Policy Research Working Paper Series 1851, The World Bank.
  4. Datta, Manjira & Mirman, Leonard J, 2000. "Dynamic Externalities and Policy Coordination," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 44-59, February.
  5. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185.
  6. Fischer, Ronald D. & Mirman, Leonard J., 1992. "Strategic dynamic interaction : Fish wars," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 267-287, April.
  7. Demetriades, Panicos O & Mamuneas, Theofanis P, 2000. "Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economics," Economic Journal, Royal Economic Society, vol. 110(465), pages 687-712, July.
  8. Catherine J. Morrison & Amy Ellen Schwartz, 1992. "State Infrastructure and Productive Performance," NBER Working Papers 3981, National Bureau of Economic Research, Inc.
  9. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  10. Lynde, Catherine & Richmond, J, 1993. "Public Capital and Long-Run Costs in U.K. Manufacturing," Economic Journal, Royal Economic Society, vol. 103(419), pages 880-93, July.
  11. Berndt, Ernst & Hansson, Bengt, 1992. "Measuring the Contribution of Capital in Sweden," Working Paper Series 365, Research Institute of Industrial Economics.
  12. David Aschauer, 1988. "Does public capital crowd out private capital?," Staff Memoranda 88-10, Federal Reserve Bank of Chicago.
  13. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S151-68, Supplemen.
  14. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  15. 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.
  16. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  17. Casas, F R, 1983. "International Trade with Produced Transport Services," Oxford Economic Papers, Oxford University Press, vol. 35(1), pages 89-109, March.
  18. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  19. Thursby, Jerry G & Thursby, Marie C, 1984. "How Reliable Are Simple, Single Equation Specifications of Import Demand?," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 120-28, February.
  20. Lynde, Catherine & Richmond, James, 1992. "The Role of Public Capital in Production," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 37-44, February.
  21. Jean-Jacques Laffont, 1988. "Fundamentals of Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121271, June.
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