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Openness, Lobbying, and Provision of Infrastructure

Ujjayant Chakravorty () and Joy Mazumdar
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Joy Mazumdar: Department of Economics, Wellesley College

Southern Economic Journal, 2008, vol. 74, issue 4, 1149-1166

Abstract: Casual empirical evidence suggests that infrastructure provision is higher in economies that are open to world trade. We develop a model of imperfect competition to show that open economies are likely to provide more infrastructure than closed economies. If infrastructure is financed by taxing a producer lobby, the open economy will overprovide while the closed economy will underinvest; an open economy approaches optimal provision when this lobby group is small in size. If financing of infrastructure is done by taxing the whole population, the closed-economy outcome may be preferred relative to that of the open economy.

JEL-codes: F43 H11 O12 (search for similar items in EconPapers)
Date: 2008
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Handle: RePEc:sej:ancoec:v:74:4:y:2008:p:1149-1166