Competition, Entry, and the Social Returns to Infrastructure in Transition Economies

Philippe Aghion and Mark Schankerman

No 2052, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper presents a simple model for analysing the contribution of investments in physical and institutional infrastructure to the transition process. In addition to the direct cost savings, infrastructure investment generates important indirect effects, or transition impacts. The model shows that, by reducing transaction costs, infrastructure intensifies product market competition. This leads to more effective weeding out of the existing high-cost firms in the market. In this model, infrastructure also increases the incentives for low-cost firms to restructure which generates additional efficiency gains, but exacerbates the existing cost asymmetry in the economy. Finally, infrastructure investment enhances the incentives for relatively low-cost firms to enter the market, and thus improves the efficiency of the entry process. The importance of these transition impacts of infrastructure depends on features of the economy, such as the degree of cost asymmetry among firms, the proportion of high-cost firms, the cost of restructuring, and entry costs for new firms.

Keywords: Competition; Entry; Infrastructure; Transition (search for similar items in EconPapers)
JEL-codes: L1 O1 P2 (search for similar items in EconPapers)
Date: 1999-01
References: Add references at CitEc
Citations: View citations in EconPapers (40)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2052 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Competition, entry and the social returns to infrastructure in transition economies (1999)
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:cpr:ceprdp:2052

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2052

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().