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How Effective Are Second-Generation Road Funds? A Preliminary Appraisal

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  • Ken Gwilliam
  • Ajay Kumar
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    Abstract

    Underfunded, inefficient road maintenance is a perennial problem in many developing economies. To address it, some countries have created "second-generation" road funds that are financed by fuel levies and managed by boards representing the interests of road users. Macroeconomists often oppose such funds, arguing that this earmarking of revenue reduces fiscal flexibility. Some argue that such road funds should be seen as an interim step toward fully commercialized road maintenance or good public sector governance--and hence subject to sunset provisions. Decisions on whether to retain (or create) such funds should then be based on their effects on resource allocation, operational efficiency, and rent seeking. Using evidence on new road funds in Africa, this article finds that they have not undermined fiscal flexibility. Moreover, they have improved the administration of road funding (in terms of execution capability) and its outputs (in terms of road conditions). So, although criteria for assessing road funds remain relevant, the funds should not automatically be considered temporary mechanisms. But when establishing new funds, government's continued role in approving spending on road maintenance should be explicitly recognized. Copyright 2003, Oxford University Press.

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    Bibliographic Info

    Article provided by World Bank Group in its journal The World Bank Research Observer.

    Volume (Year): 18 (2003)
    Issue (Month): 1 ()
    Pages: 113-128

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    Handle: RePEc:oup:wbrobs:v:18:y:2003:i:1:p:113-128

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    Cited by:
    1. Raballand, Gael & Bridges, Kate & Beuran, Monica & Sacks, Audrey, 2013. "Does the semi-autonomous agency model function in a low-governance environment ? the case of the road development agency in Zambia," Policy Research Working Paper Series 6585, The World Bank.
    2. Yeti Nisha Madhoo & Shyam Nath, 2010. "Beneficiary Charges: The Cinderella of Subnational Finance," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1317, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Richard M Bird & Joosung Jun, 2005. "Earmarking in Theory and Korean Practice," International Tax Program Papers 0513, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    4. Dimitar Radev & Richard Allen, 2006. "Managing and Controlling Extrabudgetary Funds," IMF Working Papers 06/286, International Monetary Fund.

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