Infrastructure, Incentives, and Institutions

Nava Ashraf, Edward L. Glaeser and Giacomo Ponzetto

American Economic Review, 2016, vol. 106, issue 5, 77-82

Abstract: Expensive infrastructure is ineffective if it doesn't travel the last mile. In nineteenth-century New York and modern Africa, disease has spread when urbanites chose not to use newly built sanitation infrastructure to save money. Either subsidies or Pigouvian fines can internalize the externalities that occur when people don't use sanitation infrastructure, but with weak institutions subsidies generate waste and fines lead to extortion. Our model illustrates the complementarity between infrastructure and institutions and shows how institutional weaknesses determine whether fines, subsidies, both or neither are optimal. Contrary to Becker (1968), the optimal fine is often mild to reduce extortion.

JEL-codes: H54 H76 I15 I18 N91 Q53 R53 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.p20161095
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.p20161095 (application/pdf)
https://www.aeaweb.org/aer/ds/10605/P2016_1095_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Infrastructure, Incentives and Institutions (2016)
Working Paper: Infrastructure, Incentives and Institutions (2016)
Working Paper: Infrastructure, Incentives and Institutions (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:106:y:2016:i:5:p:77-82

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().