Quality Of Public Investment Research Articles

The causal relationship between government investment and economic development in ASEAN countries

The purpose of this article is to evaluate the impact of public investment on economic growth. The data was used from the annual data of the Asian Development Bank (ADB) for 6 countries in ASEAN during 2000-2022. The methodology used in the project is to apply the unit root test to the stationarity properties of individual time series and establish the cointegration relationship between non-stationary variables using methods related to cointegration testing in the long-run. The error correction model (ECM) considers the impact of the variables public investment, public expenditure and budget revenue from taxes on short-term economic growth and long-term growth thereby calculating the adjustment speed and adjustment time of the model and using the Granger causality test with fixed effects for analysis of unbalanced panel data to comprehensively analyze the relationship between public investment and economic growth. Data analysis and processing were performed using Stata software version 17. The findings that public investment has a long-term impact on economic growth and has a two-way causal relationship in all countries. The authors provide policy implications to make public investment more effective contributing to promoting the country's socio-economic development, reviewing and improving the legal system on public investment, restructuring public investment while strongly enhancing the efficiency and quality of public investment, inviting and attracting foreign direct investment (FDI) capital, diversifying capital sources and creating more motivation for the private economic sector to develop and promulgate solutions to develop high-quality human resources.

Multiple criteria decision analysis of public investment options: application to streetlighting renewal projects

The last global economic crisis set fiscal consolidation as one of the most relevant goals of economic policy. At the same time, efforts are necessary to increase economic growth rates, particularly by increasing quantity and quality of public investment. However, the lack of fiscal space and other impediments make these goals hard to attain. On the contrary, in many countries data show negative dynamics of quantity and quality of public investment. In terms of energy efficiency investment, trends are positive. However, the pace of investment significantly underperforms the goals set. We argue that one of the major reasons is the lack of financial innovation and project selection methodology. For this reason, projects have still been mainly financed under traditional procurement models. Surprisingly, most countries do not exploit the advantages of alternative models of financing which do not affect public debt level, significantly reduce fiscal deficits and reduce fiscal risks. This article argues that a multi-criteria approach used at the initial stages of project preparation increases the potential for project realisation and the overall quantity and quality. In order to provide empirical evidence, we use information on energy efficiency streetlighting projects and present a case of a traditional versus alternative financing models. Highlights a need for a systematic approach when selecting optimal financing model is a must; a lack of financial innovation is one of the most critical impediments to a higher level of investment in revenue-generating projects common for the energy efficiency sector; alternative models of financing enable public investment increase without harming the fiscal position; a new methodology for selecting the most preferable model is presented; a policy mix should take more comprehensive stance towards complexity of public investment projects.

Assessing the effect of public capital on growth: An extension of the World Bank Long-Term Growth Model

To analyze the effect of an increase in the quantity or quality of public investment on growth, this paper extends the World Bank’s Long-Term Growth Model (LTGM), by separating the total capital stock into public and private portions, with the former adjusted for its quality. The paper presents the LTGM public capital extension and accompanying freely downloadable Excel-based tool. It also constructs a new infrastructure efficiency index, by combining quality indicators for power, roads, and water as a cardinal measure of the quality of public capital in each country. In the model, public investment generates a larger boost to growth if existing stocks of public capital are low, or if public capital is particularly important in the production function. Through the lens of the model and utilizing newly-collated cross-country data, the paper presents three stylized facts and some related policy implications. First, the measured public capital stock is roughly constant as a share of gross domestic product (GDP) across income groups, which implies that the returns to new public investment, and its effect on growth, are roughly constant across development levels. Second, developing countries are relatively short of private capital, which means that private investment provides the largest boost to growth in low-income countries. Third, low-income countries have the lowest quality of public capital and the lowest efficient public capital stock as a share of GDP. Although this does not affect the returns to public investment, it means that improving the efficiency of public investment has a sizable effect on growth in low-income countries. Quantitatively, a permanent 1 ppt GDP increase in public investment boosts growth by around 0.1–0.2 ppts over the following few years (depending on the parameters), with the effect declining over time.

Enhancing Quality and Efficiency of Public Investment in Vietnam up to 2020

Based on the theories on quality and efficiency of public investment and on the ground of a new economic model, this study carries out an analytical assessment of the management of Vietnam’s public investment, with the primary aims to detect limitations on management, carry evaluation of the investment, and propose solutions to improving its quality and efficiency. The findings indicate that both the public investment quality and efficiency of Vietnam reveal certain limitations, and no evidence can be found for the effectiveness of investment expenditures in short terms, although a long-term relation exists between the public investment and economic growth. A few comprehensive solutions to investment enhancement until 2020 are as follows: (i) Rationally adjusting investment structures and portfolios, (ii) Improving institutional environment; (iii) Controlling investment efficiency; and (iv) Modernizing the monitoring system for the public investment.

Harnessing Natural Resources for Diversification

This article outlines a vision for Africa in 2050 in which the continent narrows the gap in per capita income and development outcomes that it has with middle- and high-income countries. Specifically, this article describes the challenges of building on Africa’s endowment of natural resources to become a supplier of intermediate and finished goods and agricultural products, with a diversified private sector, a growing service sector, and a high degree of economic integration on the continent and in the world. First, the article outlines Africa’s resource endowment. Africa has a fairly modest global reserve position, with the exception of gemstones, titanium, and bauxite. Second, the article evaluates African countries’ track record in terms of extraction and processing, including a classification of countries according to their reliance on resource rents. Next, the authors present a vision for Africa’s extractive industries that has the ultimate goal of macroeconomic stability. The article suggests that stabilization/liquidity funds and wealth funds contribute to an increase in the quality of public investment and monetary policy. Finally, the authors suggest that African governments should encourage the growth of an ecosystem of supportive industries around the natural resource sector to increase the number of positive spinoffs from the extractive industries.

Efficiency-Adjusted Public Capital and Growth

Summary This paper constructs an efficiency-adjusted public capital stock series and re-examines the public capital and growth relationship. The paper also examines the effects of four specific stages of the public investment process—appraisal, selection, implementation and evaluation—on capital accumulation and growth. The results show that public capital is a significant contributor to economic growth. The quality of public investment, as measured by variables capturing the adequacy of project selection and implementation, is statistically significant in explaining variations in economic growth, a result mainly driven by low-income countries.

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.

The Quality of Public Investment

Macro-level estimates of the productivity of public capital are typically larger than micro-level estimates. The evidence also shows sizable cross-country differences in the quality of public capital. A general equilibrium growth model is introduced to explain both facts. The productivity of firms specializing in differentiated intermediate inputs depends on public capital whose provision is subject to bureaucratic corruption. Higher corruption lowers the quality of public capital and discourages specialization as well as development. Persistent difference in this quality results from multiple equilibrium levels of corruption. Simple calculations show that (i) relatively small micro-level productivity effects of public capital generate large macro-level effects, and (ii) quality differences in public capital can potentially explain a large fraction of the income gap between rich and poor nations.

Efficiency-Adjusted Public Capital and Growth

This paper constructs an efficiency-adjusted public capital stock series and re-examines the public capital and growth relationship for 52 developing countries. The results show that public capital is a significant contributor to economic growth. Although the estimated coefficient for the income share of public capital is larger in middle- than in low-income countries, the opposite is true for the marginal product of public capital. The quality of public investment, as measured by variables capturing the adequacy of project selection and implementation, are statistically significant in explaining variations in economic growth, a result mainly driven by low-income countries.

Efficiency-Adjusted Public Capital and Growth

This paper constructs an efficiency-adjusted public capital stock series and re-examines the public capital and growth relationship for 52 developing countries. The results show that public capital is a significant contributor to economic growth. Although the estimated coefficient for the income share of public capital is larger in middle- than in low-income countries, the opposite is true for the marginal product of public capital. The quality of public investment, as measured by variables capturing the adequacy of project selection and implementation, are statistically significant in explaining variations in economic growth, a result mainly driven by low-income countries.

The Quality of Public Investment

This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth. The model provides potential explanations for the contradictory empirical results on the effects of public investment found in the literature as well as for the role of the quality of public infrastructure investment in creating a gap between rich and poor countries. From a policy perspective, the paper suggests that the link between public investment and growth depends critically on the quality and efficiency of public capital.

The Quality of Public Investment

The Quality of Public Investment

Redistributive Politics, Corruption and Quality of Public Investment

This paper is an analytical attempt to isolate and differentiate the concepts of and corruption. Such analytical distinction helps us in understanding how redistributive politics can adversely affect the quality of public investment in a poor region. We highlight the possibility that better quality of public investment can be associated with a higher degree of corruption but somewhat lower magnitude of politics. We build up a political choice model where corruption and redistribution are treated as substitutes in the political strategy space. Our paper is possibly the first attempt to model the interaction corruption and redistributive politics in a poor developing economy.