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Is it Redistribution or Centralization? On the Determinants of Government Investment in Infrastructure

  • Daniel Albalate

    ()

    (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.)

  • Germà Bel

    ()

    (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.)

  • Xavier Fageda

    ()

    (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.)

The dilemma efficiency versus equity, together with political partisan interests, has received increasing attention to explain the territorial allocation of investments. However, centralization intended to introduce or reinforce hierarchization in the political system has not been object as of now of empirical analysis. Our main contribution to the literature is providing evidence that meta-political objectives related to the ordering of political power and administration influence regional investment. In this way, we find evidence that network mode’s (roads and railways) investment programs are influenced by the centralization strategy of investing near to the political capital, while investment effort in no-network modes (airports and ports) appears to be positively related to distance. Since investment in surface transportation infrastructures is much higher than that in airports and ports, and taken into account that regions surrounding the political capital are poorer than the average, we suggest that centralization rather than redistribution has been the driver for the concentration of public investment on these regions.

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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2010-15.pdf
File Function: First version, 2010
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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2010-15.pdf
File Function: Revised version, 2010
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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2010-15.

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Length: 31 pages
Date of creation: Dec 2010
Date of revision: Dec 2010
Handle: RePEc:xrp:wpaper:xreap2010-15
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
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Web page: http://www.pcb.ub.edu/xreap
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  1. de la Fuente, Angel, 2004. "Second-best redistribution through public investment: a characterization, an empirical test and an application to the case of Spain," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 489-503, September.
  2. Achim Kemmerling & Andreas Stephan, 2001. "The Contribution of Local Public Infrastructure to Private Productivity and Its Political-Economy: Evidence from a Panel of Large German Cities," CIG Working Papers FS IV 01-14, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Brian Knight, 2003. "Parochial Interests and the Centralized Provision of Local Public Goods: Evidence from Congressional Voting on Transportation Projects," NBER Working Papers 9748, National Bureau of Economic Research, Inc.
  4. Norihiko Yamano & Toru Ohkawara, 2000. "The Regional Allocation of Public Investment: Efficiency or Equity?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 205-229.
  5. Jean-Paul Faguet, 2004. "Why So Much Centralization? A Model of Primitive Centripetal Accumulation," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Achim Kemmerling & Andreas Stephan, 2010. "The Determinants of Regional Transport Investment Across Europe," Chapters, in: The Political Economy of Inter-Regional Fiscal Flows, chapter 11 Edward Elgar.
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