The politics of infrastructure investment: The role of product market competition

Arghya Ghosh and Kieron Meagher

Journal of Economic Behavior & Organization, 2015, vol. 119, issue C, 308-329

Abstract: In spatial competition, public infrastructure plays a crucial role in determining product market outcomes. In our model, consideration of infrastructure's impact on the product market drives the preferences of consumers in their dual role as voter/taxpayers. The spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes. However across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly/collusion. Furthermore, competition's boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment.

Keywords: Spatial competition; Infrastructure investment; Salop's circular city; Political economy; Referendum (search for similar items in EconPapers)
JEL-codes: D43 H40 H54 L13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:119:y:2015:i:c:p:308-329

DOI: 10.1016/j.jebo.2015.08.017

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