67,647 research outputs found

    Public Investment as Commitment

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    Should public assets such as infrastructure, education, and the environment earn the same return as private investments? We consider if time-inconsistent decision-makers can gain from institutions that enforce cost-benefit rules on large projects that influence the economy as a whole. Long-term public investments provide commitment to current preferences, leading to investment biases in such assets. The institutionalized cost-benefit prudence eliminates such biases but we show that this behavioral rule has no general social value: it implements Pareto efficiency if and only if preferences are time-consistent, and decreases welfare otherwise. We find that the long-term cost-benefit prudence is fundamentally about income transfers to the future, implying that efficient behavioral rules should target savings directly rather than the division of current investment resources.public investments, cost-benefit analysis, inconsistent preferences

    Making the case for public investment

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    FISCAL RULES AND PUBLIC INVESTMENT

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    This paper examines the link between fiscal rules and public investment both normatively and empirically. We first review the arguments for and against including public investment spending in a fiscal deficit rule. We then seek to assess the determinants of public investment, with a special focus on the role of the fiscal rules embodied in EMU. We conclude that there are practical difficulties precluding the introduction of a "golden rule" and that there is virtually no evidence that EMU would have affected public investment. Therefore, the focus on safeguarding the level of public investment is somewhat misplaced; instead, one should focus on safeguarding its productivity.Fiscal rules; public investment; fiscal deficit; European Monetary Union

    Is the impact of public investment neutral across the regional income distribution? Evidence from Mexico

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    This paper investigates the contribution of public investment to the reduction of regional inequalities, with a specific application to Mexico. We use quantile regressions to examine the impact of public investment on regional disparities according to the position of each region in the conditional distribution of regional income. Results confirm the hypothesis that regional inequalities can indeed be attributed to the regional distribution of public investment, where the observed pattern shows that public investment mainly helped to reduce regional inequalities between the richest regions.regional development, quantile regression, public investment

    Without purpose and strategy?: a spatio-functional analysis of the regional allocation of public investment in Greece

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    We utilise a large database on public investment at the prefecture (NUTS-3) level in Greece for the period 1976-2008 to examine the spatial and functional allocation of public investment in the country. We investigate the extent to which expenditures in different types of public investment are complementary across space and over time and examine their redistributive character. We also analyse regional specialisations and the geographical concentration of public investments and complementarily use an exploratory spatial data analysis to examine the extent of clustering of public investment and identify possible patterns in the geography of clusters and hotspots. Although our analysis uses predominantly descriptive tools, our results have confirmatory power, as they reveal a surprisingly random pattern for the spatial and functional allocation of public investment in Greece, thus raising important questions about the rationale for these allocations and, by implication, about the geographical, political and economic dynamics that underlie them. These questions obtain an additional salience in light of the administrative and fiscal reforms pursued currently by the Greek government under the pressure of the country’s sovereign debt crisis

    The relationship between corruption and public investment at the municipalities’ level in Indonesia

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    This research is conducted to quantitatively measure the relationship between corruption and public investment at municipalities’ level in Indonesia. According to Nash Equilibrium derived from mixed strategies, the relationship between corruption and public investment can be both positive and negative depending on the level of the corruption Index. Moreover, the econometric estimations from cross section data and pooled data consistently confirm that the relationship between corruption and public investment is in non linear quadratic form. It was found that the public investment reaches the lowest level when the corruption index ranges from 4.42-4.64.Corruption; Public Investment; Game Theory; Regional Development

    Public investment and economic growth

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    Government spending policy ; Infrastructure (Economics)

    Ranking Mechanisms in Public Investment

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    Properly spending the budget on public investments is the main issue of public authorities. The investment projects sustained by the state are very important for the entire socio-economic life. This is the reason that put the selection process of the solution under question marks and suspicions. A stable and honest rankings mechanism that is taking into account multiple socio-economic indicators and their social importance could be a solution. The transparency of the process and the implication of the contributors/citizens should be taken into consideration. The paper presents the main characteristics of the public investments regulation and procedure in Romania and it focuses on three mechanisms of ranking the solutions for an investment project. The validation of the mechanism could be made using existing data by a panel of experts as further development of the research.public investments, ranking, decision making, effectiveness, project management.

    Monetary and fiscal policy interactions with central bank transparency and public investment

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    In this paper, we study how the interactions between central bank transparency and fiscal policy affect macroeconomic performance and volatility, in a framework where productivity-enhancing public investment could improve future growth potential. We analyze the effects of central bank’s opacity (lack of transparency) according to the marginal effect of public investment by considering the Stackelberg equilibrium where the government is the first mover and the central bank the follower. We show that the optimal choice of tax rate and public investment, when the public investment is highly productivity-enhancing, eliminates the effects of distortionary taxation and fully counterbalance both the direct and the fiscal-disciplining effects of opacity, on the level and variability of inflation and output gap. In the case where the public investment is not sufficiently productivity-enhancing, opacity could still have some disciplining effects as in the benchmark model, which ignores the effects of public investment.Distortionary taxes, output distortions, productivity-enhancing public investment, central bank transparency (opacity), fiscal disciplining effect.

    Economic Growth With Optimal Public Spending Compositional

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    This paper uses a one-sector, endogenous growth model to study optimal composition between public investment and consumption in government expenditure and its relationships with economic growth. Assuming a benevolent government which maximizes a representative household’s lifetime utilities, the paper determines the unique, interior public investment share in government’s budgets, which is determined by policy and structural parameters. It finds that the conventional determinants of economic growth now generate stronger growth effects, via their indirect impacts upon optimal public spending composition. The effects emerge from raising the marginal utility of private consumption, relative to the marginal utility of public consumption, thereby inducing public investment and increasing economic growth. Our quantitative results suggest that the growth effect is sizable. The large growth effect via optimal public investment in our model has implications to East Asian economic growth miracles where public investment share and economic growth are both higher than other area’s countries.public consumption, public investment, economic growth
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