Regional Conflict and Cooperation on Inter-Regional Infrastructure: A General Equilibrium Approach

A two-region economic general equilibrium model is presented to investigate the effects of regional/distributive construction schemes of interregional infrastructures. Two different specific schemes are especially investigated, namely the property-based scheme where each region constructs its own part of the infrastructure, and the pooling scheme where the both regions invest into the one common large project. The effects of these schemes are compared and the policy implications for regional provision of inter-regional infrastructure are induced. It is especially shown that the intervention by the upper authority (by means of income transfer) has totally different effects on resulting infrastructure service level depending on the scheme that determines competitive/cooperative relationships among the regions.