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International Aspects of Public Infrastructure Investment

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  • Spiros Bougheas
  • Panicos O. Demetriades
  • Edgar L. W. Morgenroth

Abstract

Modelling infrastructure as an international public good in a two-country model of trade where each country’s social planner behaves strategically, we show that the equilibrium levels of infrastructure are sub-optimal from a global perspective. Utilising an appropriate econometric framework and data from 16 European countries over the period 1987-95, we find evidence that accords well with the main predictions of our theory. Thus, we are able to offer a plausible theoretical explanation why public capital may be undersupplied, as suggested by previous empirical literature.

Suggested Citation

  • Spiros Bougheas & Panicos O. Demetriades & Edgar L. W. Morgenroth, 2001. "International Aspects of Public Infrastructure Investment," Discussion Papers in Economics 01/4, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:01/4
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    Cited by:

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    2. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," European Economic Review, Elsevier, vol. 51(5), pages 1277-1301, July.
    3. Philip R Lane, 2014. "External Funding and Long-term Investment," RBA Annual Conference Volume (Discontinued), in: Alexandra Heath & Matthew Read (ed.),Financial Flows and Infrastructure Financing, Reserve Bank of Australia.
    4. Akihiko Yanase & Makoto Tawada, 2017. "Public infrastructure for production and international trade in a small open economy: a dynamic analysis," Journal of Economics, Springer, vol. 121(1), pages 51-73, May.
    5. Lorz, Oliver, 2020. "Investment in trade facilitating infrastructure: A political-economy analysis," European Journal of Political Economy, Elsevier, vol. 65(C).
    6. Charles Figuières & Fabien Prieur & Mabel Tidball, 2013. "Public infrastructure, noncooperative investments, and endogenous growth," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 587-610, May.
    7. Mirza, Tasneem, 2008. "Analyzing the Effects of Trade Facilitation on International Trade Using a Simultaneous Approach," Conference papers 330239, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Akihiko Yanase & Ngo Van Long & Ngo Van Long, 2020. "Trade Costs and Strategic Investment in Infrastructure in a Dynamic Global Economy with Symmetric Countries," CESifo Working Paper Series 8707, CESifo.
    9. Andreas Kopp, 2005. "Aggregate Productivity Effects of Road Investment - A Reassessment for Western Europe," ERSA conference papers ersa05p631, European Regional Science Association.
    10. Egger, Hartmut & Falkinger, Josef, 2006. "The role of public infrastructure and subsidies for firm location and international outsourcing," European Economic Review, Elsevier, vol. 50(8), pages 1993-2015, November.
    11. Andrea Bonilla‐Bolaños, 2021. "A step further in the theory of regional integration: A look at the South American integration strategy," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(5), pages 845-873, July.
    12. Akihiko Yanase & Ngo Van Long, 2020. "Strategic Investment in an International Infrastructure Capital: Nonlinear Equilibrium Paths in a Dynamic Game between Two Symmetric Countries," Mathematics, MDPI, vol. 9(1), pages 1-24, December.
    13. Anwar, Sajid, 2008. "Labour supply, foreign investment and welfare in the presence of public infrastructure," Economic Modelling, Elsevier, vol. 25(5), pages 959-967, September.
    14. Colin J Hunt, 2011. "The Interaction of Public and Private Capital," Post-Print hal-00675397, HAL.
    15. Anwar, Sajid, 2006. "Provision of public infrastructure, foreign investment and welfare in the presence of specialisation-based external economies," Economic Modelling, Elsevier, vol. 23(1), pages 142-156, January.
    16. Morgenroth, Edgar, 2000. "Regionalisation and the Functions of Regional and Local Government," Papers BP2001/4, Economic and Social Research Institute (ESRI).
    17. Ujjayant Chakravorty & Joy Mazumdar, 2008. "Openness, Lobbying, and Provision of Infrastructure," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1149-1166, April.
    18. Derek Kellenberg, 2015. "Infrastructure, Multinational Affiliate Production, and the Pattern of Trade," International Economic Journal, Taylor & Francis Journals, vol. 29(3), pages 475-502, September.
    19. Akihiko Yanase & Makoto Tawada, 2020. "Public infrastructure and trade in a dynamic two‐country model," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 447-465, May.
    20. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.
    21. Sun-Kwan Lee & Euijune Kim, 2015. "The effects of highway investments on production costs in the Korean manufacturing sector," International Journal of Urban Sciences, Taylor & Francis Journals, vol. 19(2), pages 182-191, July.
    22. Colin Turner, 2018. "The governance of polycentric national infrastructure systems: Evidence from the UK National Infrastructure Plan," Environment and Planning C, , vol. 36(3), pages 513-529, May.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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