INFRASTRUCTURAL COMPETITION AMONG JURISDICTIONS

This paper models jurisdictions that compete for an industry by building infrastructure more rapidly than their identical neighbors. Such competition can waste resources. Lucrative 'prizes' - the tax revenues and the value of jobs that an incoming firm would provide - stimulate infrastructural spending and waste. Low initial levels of infrastructure discourage infrastructural competition. The paper urges a cautious approach toward federal subsidies of local expenditures on infrastructure.