The dynamics of domestic and international infrastructure investments

This paper analyses the optimal investment policy in domestic and international infrastructure through a model of competition among countries. The framework provided by Martin and Rogers [Martin, P. and Rogers, C., 1995, Industrial location and public infrastructure, Journal of International Economics, 39, 335-51.] is here extended to include dynamic aspects. The optimal investment trajectories are characterized in two situations: first, when coordination among countries is reached and second when countries behave egoistically. Since international infrastructure produces positive externalities, it emerges that the second situation is sub-optimal.