Modelling infrastructure as an international public good in a two country model of trade where each country's social planner behaves strategically, we show that the equilibrium levels of infrastructure are sub-optimal from a global perspective. Utilising an appropriate econometric framework and data from 14 countries over the period 1971-90, we find evidence that accords well with the main predictions of our theory. Thus, we are able to offer a plausible theoretical explanation why public capital may be under-supplied, as suggested by previous empirical literature.
More papers in CIBS Research Papers in International Business from London South Bank University CIBS Address: London South Bank University Business School 103 Borough Road London SE1 0AA United Kingdom Contact information at EDIRC. Series data maintained by Michael Rigby ().