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Spatial Misallocation of Complementary Infrastructure Investment : Evidence from Brazil

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  • Pérez-Sebastián,Fidel
  • Serrano Quintero,Rafael
  • Steinbuks,Jevgenijs

Abstract

How does the misallocation of complementary public capital affect the spatial organization of economic activity To answer this question, this paper endogenizes the government's decision to invest in the transport and electricity networks. A novel multi-sector quantitative spatial equilibrium model incorporates the quality of the electric power and the road transportation infrastructure networks, which determine sectoral productivities and trade costs. Simulation results for the Brazilian economy point to significant welfare gains from reallocating infrastructure investment. Spatial and fiscal complementarities in heterogeneous infrastructure provision determine a sizeable part of those gains. Misallocation of both infrastructure investments is positively associated with local political support for the incumbent authority.

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  • Pérez-Sebastián,Fidel & Serrano Quintero,Rafael & Steinbuks,Jevgenijs, 2023. "Spatial Misallocation of Complementary Infrastructure Investment : Evidence from Brazil," Policy Research Working Paper Series 10650, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10650
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