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Openness, Lobbying, and Provision of Infrastructure

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  • Ujjayant Chakravorty
  • Joy Mazumdar
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.

Suggested Citation

  • Ujjayant Chakravorty & Joy Mazumdar, 2008. "Openness, Lobbying, and Provision of Infrastructure," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1149-1166, April.
    • Handle: RePEc:wly:soecon:v:74:y:2008:i:4:p:1149-1166
    DOI: 10.1002/j.2325-8012.2008.tb00885.x
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    References listed on IDEAS

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    Cited by:

    1. Verma, Priyam, 2024. "Optimal Infrastructure after Trade Reform in India," Journal of Development Economics, Elsevier, vol. 166(C).

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