Essays On The Economics Of Infrastructure And Public Investment PDF Download

In this thesis, I provide three essays which address various issues related public investment. Firstly, in chapter one, I look at the impact of politics on the use of Public-Private Partnerships. I use a simple theoretical model to show that while international organisations and governments globally often promote Public-Private Partnerships as a means to limit pork barrel politics in infrastructure investments, this assumed advantage of Public-Private Partnerships does not in fact exist. I discuss different types of potential Public-Private Partnership contracts, and show in turn the issues with each of these contract types. In the second chapter, joint work with Margaret Leighton (TSE) I examine intergovernmental transfers in Brazil, and whether these lead to increases in local level government spending or whether they crowd-out local expenditures. I use exogenous variation in the level of transfer a municipality receives to find that as opposed to the theory of crowding-out, increased transfers actually lead to crowding in; the local government increases tax revenues following an increase in transfers, and in turn raises spending, particularly capital spending. This effect varies according to the wealth of the municipality, with poorer municipalities increasing particularly their social spending, however it notably does not vary according to the political power of the local municipal government. I also observe that increased local spending through transfers has direct effects on local outcomes, indicating that money received through this channel is not lost to inefficiencies in spending. This is documented in educational spending and resultant outcomes. Finally in chapter three, leaving the political decisions involved in infrastructure provision aside, I examine the outcomes of such investment. In joint work with Stéphane Straub (TSE), we use a natural experiment, the building of a new capital in Brazil, Brasília, and the subsequent construction of radial highways to connect it to pre-existing important towns, to show that the building of highways has substantial impacts on GDP and populations. These effects are heterogeneous, and in Brazil the effects vary according to whether the newly connected municipality connects to an industrialised, richer, well-serviced city, or a poorer, less developed city. In the North, new highway connections lead to increased GDP and populations for municipalities near the highway, as these areas gain access to wider markets and become secondary centres of economic activity. In theSouth, however, for municipalities within a few hundred kilometres of their state capital, a new highway connection leads to reduced GDP and population, as economic activity appears to shift towards the major pre-existing agglomerations. These centres are large and developed enough to have substantial economic activity and widespread provision of local services.