Aghion, Philippe and Schankerman, Mark
An analytical framework for evaluating transition impact of infrastructure projects.
European Bank for Reconstruction and Development, London, UK.
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This paper provides a non-technical summary of a framework for evaluating the transition impact (social returns) of any infrastructure investment that reduces transaction costs and thereby intensifies product market competition. The framework applies both to physical and institutional infrastructure. We show that infrastructure generates welfare gains by improving the ability of the market to weed out existing inefficient firms ("market selection"), by changing the incentives for firms to lower their costs by restructuring, and by providing greater (less) incentives to enter for low (high) cost potential entrants. We illustrate by simulation analysis that conventional cost-benefit analysis is not likely to capture these dynamic transition impacts of infrastructure.
||© 2000 European Bank for Reconstruction and Development
||infrastructure, market selection, restructuring, entry, cost-benefit analysis
|Library of Congress subject classification:
||H Social Sciences > HD Industries. Land use. Labor
|Journal of Economic Literature Classification System:
||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O22 - Project Analysis
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
||Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
||28 May 2008 13:54
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