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A Political Economy Model of Infrastructure Allocation: An Empirical Assessment

  • Olivier Cadot
  • Lars-Hendrik Röller
  • Andreas Stephan

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. ZUSAMMENFASSUNG - (Ein polit-ökonomisches Modell von Infrastrukturallokation: Eine empirische Einschätzung) In dieser Untersuchung wird ein simultanes Gleichungssystem zur Schätzung des Beitrags von Verkehrsinfrastrukturinvestitionen zu regionalem Wachstum verwendet. Es wird explizit der politische Prozeß modelliert, der Infrastrukturinvestitionen determiniert; dadurch wird eine mögliche Ursache einer verzerrten Parameterschätzung vermieden, die eintreten kann, wenn Produktionsfunktionen einzeln geschätzt werden. Gleichzeitig fließen in das Modell weitere empirisch überprüfbare Hypothesen über die Determinanten von Infrastrukturpolitik ein. Die empirischen Ergebnisse für einen Paneldatensatz mit 21 französischen Regionen im Zeitraum 1985-1991 zeigen, daß unterstützende Aktivitäten in der Tat einen signifikanten Einfluß auf die regionale Allokation von Verkehrsinfrastrukturinvestitionen haben. Darüber hinaus werden nur wenig empirische Hinweise dafür gefunden, daß auch erwartete Produktivitätseffekte von Infrastruktur bei der regionalen Allokation in Frankreich von Bedeutung sind. Classification_JEL:

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 99-15.

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Length: 40 pages
Date of creation: Oct 1999
Date of revision:
Publication status: Forthcoming in the Journal of Public Economics .
Handle: RePEc:wzb:wzebiv:fsiv99-15
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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  3. Alicia H. Munnell & Leah M. Cook, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
  4. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  5. 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.
  6. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  7. Dirk Bergemann & Juuso Valimaki, 1998. "Dynamic Common Agency," Discussion Papers 1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. 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.
  9. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
  10. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
  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. 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.
  13. Negishi, Takashi, 1973. "The excess of public expenditures on industries," Journal of Public Economics, Elsevier, vol. 2(3), pages 231-240, July.
  14. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  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. Robert Eisner, 1991. "Infrastructure and regional economic performance: comment," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 47-58.
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