Financing infrastructure investment and socio-economic development

Peter Nijkamp and S. Rienstra

No 24, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: There is over the last few years a clear trend in Europe to privatise traditional governmental tasks, also because of new EU legislation. Many of these tasks have traditionally been carried out by the government itself, largely because of the ‘natural monopoly’ argument. Examples of current and future privatisation policies are the telecommunication and energy sector. For transport infrastructure (in this paper limited to roads and railways) however, the picture is less unambiguous, as in the past decade the governments have even tended to increase their influence, e.g., by formally taking over the financing of infrastructure. In this paper it is analyzed in how far the traditional arguments for government intervention are still valid. First, the strategic importance of transport infrastructure is investigated by analyzing the resulting economic impacts at several spatial levels. Next, we investigate how this affects the financing and operation of transport infrastructure as a traditional government task, by applying inter alia the so-called Pentagon model and by employing the well-known Coase-theorem. In this context, the traditional arguments for government intervention and possibilities for private operation and financing of transport infrastructure are reviewed. It is concluded that the traditional arguments for government intervention have become less valid and that privatising transport infrastructure may improve the competitive position of countries or regions.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:vua:wpaper:1995-24

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