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/active/publications/discussion_papers/dp.php?dpno=2336

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.