Advanced Search
MyIDEAS: Login to save this paper or follow this series

Walking up the down escalator : public investment and fiscal stability

Contents:

Author Info

  • Easterly, William
  • Irwin, Timothy
  • Serven, Luis

Abstract

Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a preponderant focus on them encourages governments to invest too little. Cash flow targets also encourage governments to shift investment spending off budget, by seeking private investment in public projects-irrespective of its real fiscal or economic benefits. To evade the action of cash flow targets, some have suggested excluding from their scope certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals). These stopgap remedies might sometimes help protect investment, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and where appropriate including such measures in fiscal targets or even fiscal rules, replacing the exclusive focus on liquidity and debt.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2007/03/06/000016406_20070306100250/Rendered/PDF/wps4158.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4158.

as in new window
Length:
Date of creation: 01 Mar 2007
Date of revision:
Handle: RePEc:wbk:wbrwps:4158

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Public Sector Expenditure Analysis&Management; Public Sector Economics&Finance; Investment and Investment Climate; Economic Stabilization; Fiscal Adjustment;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2007. "The Basic Public Finance of Public-Private Partnerships," NBER Working Papers 13284, National Bureau of Economic Research, Inc.
  2. Easterly, William & Rebelo, Sérgio, 1994. "Fiscal Policy and Economic Growth: An Empirical Investigation," CEPR Discussion Papers 885, C.E.P.R. Discussion Papers.
  3. Li, Wei & Xu, Lixin Colin, 2004. "The Impact of Privatization and Competition in the Telecommunications Sector around the World," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 395-430, October.
  4. Philip Keefer & Stephen Knack, 2007. "Boondoggles, Rent-Seeking, and Political Checks and Balances: Public Investment under Unaccountable Governments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 566-572, August.
  5. Newbery, David M & Pollitt, Michael G, 1997. "The Restructuring and Privatization of Britain's CEGB--Was It Worth It?," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 269-303, September.
  6. William Easterly, 1999. "When is fiscal adjustment an illusion?," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 55-86, 04.
  7. Fontaine, Ernesto R, 1997. "Project Evaluation Training and Public Investment in Chile," American Economic Review, American Economic Association, vol. 87(2), pages 63-67, May.
  8. Ferreira, Pedro Cavalcanti Gomes & Araújo, Carlos Hamilton Vasconcelos, 2006. "On the Economic and Fiscal Effects of Infrastructure Investment in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 613, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  9. Rioja, Felix K., 2003. "Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2281-2304, September.
  10. Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2001. "Liberalizing basic telecommunications : the Asian experience," Policy Research Working Paper Series 2718, The World Bank.
  11. Ferreira, Pedro Cavalcanti Gomes & Nascimento, Leandro Gonçalves do, 2005. "Welfare and Growth Effects of Alternative Fiscal Rules for Infrastructure Investment in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 604, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  12. Romp, Ward & de Haan, Jakob, 2005. "Public capital and economic growth: a critical survey," EIB Papers 2/2005, European Investment Bank, Economics Department.
  13. repec:reg:wpaper:284 is not listed on IDEAS
  14. Kalaitzidakis, Pantelis & Kalyvitis, Sarantis, 2004. "On the macroeconomic implications of maintenance in public capital," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 695-712, March.
  15. Ros, Agustin J, 1999. "Does Ownership or Competition Matter? The Effects of Telecommunications Reform on Network Expansion and Efficiency," Journal of Regulatory Economics, Springer, vol. 15(1), pages 65-92, January.
  16. Wallsten, Scott J, 2001. "An Econometric Analysis of Telecom Competition, Privatization, and Regulation in Africa and Latin America," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 1-19, March.
  17. Faye Steiner, 2001. "Regulation, industry structure and performance in the electricity supply industry," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 143-182.
  18. Mintz, Jack M. & Smart, Michael, 2006. "Incentives for public investment under fiscal rules," Policy Research Working Paper Series 3860, The World Bank.
  19. Felix K. Rioja, 2003. "The Penalties of Inefficient Infrastructure," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 127-137, February.
  20. Clive Harris, 2003. "Private Participation in Infrastructure in Developing Countries : Trends, Impacts, and Policy Lessons," World Bank Publications, The World Bank, number 15124.
  21. Julie Tam, 2004. "Long-term public finance report: an analysis of fiscal sustainability," Money Macro and Finance (MMF) Research Group Conference 2003 98, Money Macro and Finance Research Group.
  22. David McKenzie & Dilip Mookherjee, 2003. "The Distributive Impact of Privatization in Latin America: Evidence from Four Countries," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  23. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024.
  24. Suescun, Rodrigo, 2005. "Fiscal space for investment in infrastructure in Colombia," Policy Research Working Paper Series 3629, The World Bank.
  25. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-89, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Grigoli, Francesco & Mills, Zachary & Verhoeven, Marijn & Vlaicu, Razvan, 2012. "MTEFs and fiscal performance: panel data evidence," Policy Research Working Paper Series 6186, The World Bank.
  2. Vlaicu, Razvan & Verhoeven, Marijn & Grigoli, Francesco & Mills, Zachary, 2014. "Multiyear budgets and fiscal performance: Panel data evidence," Journal of Public Economics, Elsevier, vol. 111(C), pages 79-95.
  3. Calderon, Cesar & Serven, Luis, 2010. "Infrastructure in Latin America," Policy Research Working Paper Series 5317, The World Bank.
  4. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, vol. 17(3), pages 235-266, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4158. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.