DP2336 A Political Economy Model of Infrastructure Allocation: An Empirical Assessment

Author(s): Olivier Cadot , Lars-Hendrik Röller , Andreas Stephan

Publication Date: December 1999

Keyword(s): France , Growth , Infrastructure , Lobbying , Political Economy

JEL(s): D72 , D78 , O40

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP2336.asp

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.