Second-best redistribution through public investment: a characterization, an empirical test and an application to the case of Spain

This paper develops an empirical methodology for assessing the optimality of public investment policy. The proposed test works by comparing the observed distribution of the stock of infrastructures across regions with the optimal allocation derived from a planning problem in which the observed degree of ex-post redistribution is taken as given. An application of the procedure to the Spanish case suggests that public investment has been too redistributive in this country. (C) 2003 Elsevier B.V. All rights reserved.