Level Of Public Investment Research Articles

Endogenous Timing in Tax and Public-Investment Competition

This study analyzes an endogenous order of moves in an interregional competition for mobile capital, where countries choose their tax or subsidy rate and public-investment levels. In equilibrium, countries set tax or subsidy rates simultaneously, but choose their public-investment levels sequentially. In addition, on comparing the welfare between the simultaneous-move and sequential-move outcomes, we find that (i) the sequential-move welfare levels are always larger, and (ii) the regional disparity in the sequential-move outcome is larger (smaller) than that in the simultaneous-move outcome if the capital-exporting (-importing) country leads in public investment.

Political Economy of the Debate on Industrial Growth and Stagnation in India: A Review

Slowdown of industrial growth, particularly since the late sixties, had attracted a great deal of scholarly attention in India. That ongoing scholarly discussions created a debate which was in marked contrast to the relative consensus that prevailed in the professional economic circles in the sixties. Many explanations had been offered to solve this debate. Those explanations, some mutually reinforcing, others mutually conflicting, have highlighted the following set of factors: poor agricultural performance despite the Green Revolution. relative price movements resulting in a shift in terms of trade against industry, unequal income distribution and resulting lack of demand, slowdown in import substitution, declining levels of public investment and increasing inefficiencies in the industrial structure resulting from governmental controls and policies. Now the obvious questions are: Why this incommensurability? How far do the available explanations account for the slow industrial growth? Are there other alternative explanations? On what yardsticks can we say that there has been a slowdown? Is the slowdown after 1965-66 a secular or cyclical process’? What does it mean for future policy’? In this review I will try to answer these fundamental questions through analytical reasoning of different articles.

Urban Planning in Africa: Which Alternative for Poor Cities? The Case of Koudougou in Burkina Faso

The efforts made to plan cities in emerging and developing countries are confronted to multiple issues, especially in small and middle sized cities which can be considered as poor through several criteria: socio-economic level of majority of population; low levels of public investments, weak quality of local administration, and large dependence of external donors. Following several authors, one of the main reason is that philosophy and methods of urban planning applied to these specific contexts are directly reproduced from a Western tradition which doesn’t correspond to the local and national context in terms of needs, priorities and organization of the financial resources. The case of Koudougou, a medium sized city in one of the poorest countries in the world, Burkina Faso, will give the opportunity to understand concretely how these deficiencies are translated in an urban context, and foresee, more globally, alternative models of urban planning better adapted to poor cities, whose number of inhabitants is growing steadily.

Reform of the Policy on Public Debt Limits in Fund-Supported Programs

The reform of the Fund’s policy on the use of conditionality on public external debt in Fund-supported programs (the “debt limits policy”) has been under discussion since March 2013. The discussion has taken place against a backdrop where lower income countries are seeking to boost growth through higher public investment levels, targeted in particular at large infrastructure gaps, while facing both a wider range of external financing opportunities and limits on the supply of traditional concessional financing. The reform of the Fund’s policy on debt conditionality in 2009 was a first step to accommodate these new realities: experience with the 2009 reforms has pointed to the need for more fundamental reforms to provide countries with greater flexibility to finance productive investments while containing risks to medium-term debt sustainability. The reforms proposed here build on the Board review of the debt limits policy in March 2013, ensuing informal Board discussions in January and May 2014, discussions at an informal seminar in September 2014, and various stakeholder consultations. In developing this reform proposal, staff has sought to first specify a robust set of principles to guide the use of public debt conditionality in all Fund arrangements and then examine how these principles should apply in the specific circumstances of countries that normally rely on official external concessional financing.

Bureaucrats, voters, and public investment

This paper explores the provision of a durable public good in Romer and Rosenthal's agenda setter model. It identifies a type of equilibrium, called a Romer–Rosenthal equilibrium, in which in every period the bureaucrat proposes the maximum level of public investment the voter will support. The paper establishes that such an equilibrium exists for a variety of public good benefit functions. Equilibrium public good levels converge or almost converge to a steady state. These steady states can involve a unique public good level being provided each period or may exhibit a two period cycle. Steady state public good levels exceed the voter's optimal level. More surprisingly, steady state equilibrium reversion levels can exceed the voter's optimal steady state level, meaning that reversion levels cannot be used to bound the optimal level. Reflecting the inability of the agents to commit to their future proposing and voting behavior, equilibrium paths are Pareto inefficient.

Surging Investment and Declining Aid: Evaluating Debt Sustainability in Rwanda

Rwanda is a unique case among its Sub-Saharan African peers in that it has already undergone a large scaling-up of public investment. The Rwandan government has made clear its desire to lower its reliance on foreign aid while still maintaining high public investment levels. We use the model of public investment, growth, and debt sustainability in Buffie et al. (2012) to evaluate the macroeconomic consequences of a possible scaling-down of investment in Rwanda. Using the model, we can gauge the consequences of different financing mechanisms and investment efficiency levels on the economy. We find that with some commercial borrowing and a modest tax adjustment, the authorities may be able to retain their high investment spending while still reducing their reliance on foreign aid.

Surging Investment and Declining Aid: Evaluating Debt Sustainability in Rwanda

Rwanda is a unique case among its Sub-Saharan African peers in that it has already undergone a large scaling-up of public investment. The Rwandan government has made clear its desire to lower its reliance on foreign aid while still maintaining high public investment levels. We use the model of public investment, growth, and debt sustainability in Buffie et al. (2012) to evaluate the macroeconomic consequences of a possible scaling-down of investment in Rwanda. Using the model, we can gauge the consequences of different financing mechanisms and investment efficiency levels on the economy. We find that with some commercial borrowing and a modest tax adjustment, the authorities may be able to retain their high investment spending while still reducing their reliance on foreign aid.

Institutions and public investment: an empirical analysis

This paper investigates the effect of institutional quality on the levels, volatility and quality of public investment. Our findings suggest an inverse relationship between public investment levels and institutional quality, supporting the idea that governments use public investment as a vehicle for rent seeking. We also find that lower quality of governance increases the volatility of public investment. Finally, we provide some tentative evidence of a positive relationship between institutional quality and the quality of infrastructure. Policymakers who aim to reduce infrastructure needs through capital spending should take measures to strengthen institutional capacity to manage public investments.

Scenario of Viability Gap Funding (VGF) Concept in Indian Infrastructure Projects

Infrastructure is a key area since it provides the main thrust and impetus area in the growth of a developing nation like India. A major area of concern for sustaining the real gross domestic product (GDP) growth in India has been the lack of adequate infrastructure, which can support the growth process. The deplorably low levels of public investment have rendered India’s physical infrastructure incompatible with large increases in the national product. Clearly, without improving the rate of infrastructure investment, the expected growth rate of 9 per cent and above at best would remain modest. The Planning Commission of India has estimated that investment in infrastructure sector defined broadly to include road, rail, air and water transport, electric power, telecommunications, water supply and irrigation will need to be of the order of about ₹45 lakh crores or US$1.4 trillion during the 12th Five-year Plan period. India has one of the largest road networks in the world, aggregating around 33 lakh km; historically, the budgetary resources from the governments have been the major source of financing for infrastructure such as road projects in India. This article focuses on Viability Gap Funding (VGF) that has been used for financing of infrastructure projects and specially for road projects in India. The purpose of this article is to examine and analyse viability of the VGF scheme for Indian road projects by studying projects being covered under the VGF option.

Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We took advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 37 countries observed over the period 1980-2005, our results are twofold. First, the instability of government tax revenue leads to the instability of both public investment and government consumption, and also reduces the level of public investment. Second, the reliance on domestic indirect taxation-based systems appears to have a robust stabilising effect.

CHANGING THE FACE OF NEW ZEALAND'S NATIONAL INJURY REPORTING

BackgroundNew Zealand has had a national injury prevention strategy since 2003. Until last year, annual monitoring of the Strategy has focused upon producing mortality and morbidity indicators and reporting activity...

A Sociological Analysis of Economic Impediments of Development in Education Sector: A Case of Southern Punjab (Pakistan)

The rate of schooling success in adult population at primary, secondary and higher education has positive relationship with the growth of GNP. The acquisition and application of knowledge by different countries has been governed largely by whether their population has acquired traits and motivations associated with formal schooling. They are dependent heavily on the larger part of economic conditions and ideological influences. Government is encouraging private sector investment in education sector but it more focuses on the urban areas not only denying equitable admittance to basic education for people of backward areas but also perpetuating poor educational status of the people. There are various economic impediments that are hampering the process of development in education sector of Pakistan. These impediments comprise of disparities between region and gender, lack of trained teachers, deficiency of proper teaching materials, poor physical infrastructure of schools and low levels of public investment in primary education sector. A sample size of N1=600 respondents (n1=200 parents, n2=200 students and n3=200 teachers) was taken from n4=50 affiliated schools (from BISE) through multistage sampling technique. Data was collected through interview schedule and then statistical test of ANOVA was used for the purpose of establishing the causal relationship among the dependent and independent variables. Thus the researcher concluded that lack of well designed curriculum, underinvestment in education sector, corruption, inflation, low parental income and cost of schooling deprives the children from getting quality education. Thus increasing the allocation of funds to education sector, provision of administrative autonomy, lessening the direct cost of schooling and improvement in infrastructural facilities are the major remedies for reducing the negative impacts of these economic impediments on education sector of Southern Punjab (Pakistan).

Public Investment in the UK

Toigo and Woods consider the role of public investment in the UK fiscal policy framework. First, they examine the general guidelines for public investment policy: these should address both microeconomic considerations concerning efficiency and the costs and benefits of individual projects and macroeconomic considerations about the impact of the aggregate level of public investment in the short and the long term. The Authors examine the arguments supporting a specific treatment of public investment (the potential to self-finance, inter-generational fairness and the political economy issues leading to a bias against public investment) and the way this treatment can be embodied in a rule based framework. Finally, they describe the UK framework both at the macro and micro level and examine the role of Public Private Partnerships. Toigo and Woods conclude noting that the new framework has contributed to addressing the shortfall in public investment which had previously characterised the UK.

Actualisation et développement durable : en faisons-nous assez pour les générations futures?

Do we do enough for the future ? This question is related to many different current issues, from the reduction of sovereign debt in Europe, to the pension reform, the fight against climate change, the preservation of natural resources, the level of public investment in infrastructure, or the fiscal treatment of long-term savings for example. Our social responsibility towards future generations is decentralized through the choice of the discount rate, which determines the tradeoff between present sacrifices and future benefits. How should we define the efficient level of long-termism? In this paper, I summarize the most important evolutions in the economic analysis of this question in recent years. Given the strong uncertainties that prevail concerning the long term evolution of our Society, I recommend to use a discount rate ranging from 2.5% to 3.5% for time horizons shorter than 20 years, going down to 1% for time horizons above 100 years.

Political Institutions and Public R&D Expenditures in Democratic Countries

While research and development (R&D) expenditure is crucial in a nation's competitive advantage, factors determining levels of public investment in R&D have yet to be examined. This article seeks to fill this void, focusing on different democratic institutions such as presidential versus parliamentary systems, majoritarian versus proportional electoral systems, federal versus unitary systems, bicameral versus unicameral legislatures, and the effective number of parties. Building upon theories of political institutions and government size and utilizing public R&D appropriations data from 18 Organization for Economic Cooperation and Development (OECD) countries between 1981 and 2007, this article reports that democratic institutions do matter in the levels of public R&D spending. However, the effect is more complicated across the different types and performers of research than expected. Additionally, the effect of one institutional dimension is found to be moderated by the existence of the other dimensions, which makes it clearly more challenging to sort out different degrees and directions of the relationships between R&D expenditures and political institutions.

Exogenous Oil Shocks, Fiscal Policy and Sector Reallocations in Oil Producing Countries

Previous literature has suggested that different mechanisms of transmission of exogenous oil shocks are responsible for the negative effects on the economic performances of oil exporting countries. This paper aims at providing further evidence on the role of sectoral reallocation between private and public sectors in explaining the impact of shocks to oil revenues on the economic growth rates of major oil producing countries (namely the GCC - Gulf Corporation Council - countries). The effects of oil shocks and expansionary fiscal policy on the business cycle of oil producing countries are examined. The possibility to distinguish between various components of public sector spending policy (that is, purchases of consumption goods, investments in productive activities and compensation for public employees) is, in particular, allowed for. A real business cycle (RBC) model is calibrated to fit the data on an “average” oil producing country. Results from the simulation of the theoretical model suggest that the possibility that crowding-out effects of public over private investments can explain a large fraction of the negative effects of shocks to oil revenues on the private sector of the economy. In addition, since the growth in size of the public sector is unable to compensate for the reduction in size of the private sector, an increase in oil revenues has the effect to decrease total output. An expansionary fiscal policy is argued to have significant positive effects on private investments, employment and overall production. On the contrary, a shock to government consumption expenditure impacts negatively the level of public investment. As employment in the public sector increases significantly, public output responds positively to a shock in government consumption expenditure. Finally, an instantaneous negative effect on total investments and on the stock of capital in the economy is predicted. However, driven by the increase of the number of employees in the economy, total output expands.

Tax Revenue Instability in Sub-Saharan Africa: Consequences and Remedies

This paper focuses on the sources and consequences of the instability of tax revenue in Sub-Saharan African countries. We take advantage of a unique and extraordinarily rich dataset on the composition of tax revenues for a large number of countries. Using panel data for 39 countries observed over the period 1980-2005, our results are threefold. Firstly, the instability of government tax revenue leads to an instability of both the public investment and government consumption, and finally, reduces the level of public investment. Secondly, foreign aid inflows appear to be an effective insurance mechanism against the instability of tax revenue by lowering the sensitivity of public investment with respect to tax revenue shocks. Finally, the reliance on domestic indirect taxation-based systems seems more stabilizing than the dependency on trade tax revenue.

Supply Curves for Conserved Electricity

In this paper, we introduce a new top-down approach to modeling the effects of publicly financed energy-efficiency programs on electricity consumption and carbon dioxide emissions. The approach draws on a partial-adjustment econometric model of electricity demand and represents the results of a reverse auction for electricity savings from different levels of public investment. The model is calibrated to recent estimates of the cost-effectiveness of rate payer–funded efficiency programs at reducing electricity consumption. The results suggest that supply curves for conserved electricity are upward sloping, convex, and dependent on policy design and electricity prices. Under the scenarios modeled, electricity savings of between 1 and 3 percent are achievable at a marginal cost of $50 per megawatt hour (MWh) and a corresponding average cost of $25–$35/MWh.

The Impact of Market Exposure on Public Goods Provision

Low levels of public goods provision in many developing countries’ rural communities often force the poor to approach someone with considerable command over both financial and social resources to act as their patron. However engaging with the patron – typically a landlord – does not guarantee public provision, as inequality and lack of alternative options considerably weakens peasants’ bargaining power, thus enabling the landlord to use peasants’ votes to secure public resources for his own benefit. This paper proposes to increase peasants’ bargaining power, and thus their ability to pressurize their patron to broker public goods for them, by increasing their alternative options through connectivity. In order to empirically test the viability of this solution the paper makes use of a natural experiment found in the construction of a motorway in Pakistan. Using household-level data, the study shows that households situated close to the road enjoy a significantly higher level of public investment when compared to similar peasants living in isolated villages. Moreover, the data finds the beneficial impact of connectivity is felt most strongly by the socially lower classes within rural society.

Overlapping tax revenue, soft budget, and rent seeking

This paper investigates how the soft-budget constraint with grants from the central government to local governments tends to internalize the vertical externality of local public investment by stimulating local expenditure when both the central and local governments impose taxes on the same economic activities financed by public investment. The model incorporates the local governments’ rent-seeking activities in a multi-government setting. The soft-budget constraint is welfare deteriorating because it stimulates rent-seeking activities, although a soft-budget game may attain the first-best level of public investment.