Could Foreign-Aid Financing Cause Excess Depreciation of Public Capital? Two Simple Hypothetical Cases
AbstractThis paper examines the possibility that foreign aid financing for public capital accumulation in developing countries may lead to excess depreciation of capital. The depreciation rate on public capital is endogenised in a general equilibrium framework in which the government collects a consumption tax to finance maintenance and repair expenditures as well as public investment. Two simple cases are formulated and analysed to show that excess depreciation of public capital may result from budgetary and international aid and financing distortions that skew allocations to new investment rather than to maintenance of existing capital.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 34 (2004)
Issue (Month): 2 (September)
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Postal: GPO Box 2434, BRISBANE QLD 4001
Web page: http://www.journals.elsevier.com/economic-analysis-and-policy/
More information through EDIRC
Accumulation; Aid; Capital; Expenditure; Foreign Aid; Investment; Public Capital;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F35 - International Economics - - International Finance - - - Foreign Aid
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
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