Investment Appraisal in the Public Sector
Recent developments, such as privatization and the private finance initiative, have raised the issue of which assets should be owned by the public sector and whether assets have different values in the public and private sectors. In order to answer these questions, we first note that the allocative considerations that usually motivate government intervention need not require the direct provision of services by the government using government-owned assets. We then argue that the government should own the assets used to provide the services where the private sector fears expropriation by the government, or where ownership confers on the private sector such power as to preclude efficient allocations. Finally, we argue that the discount rate for governments' projects equals the expected return on comparable investments in the capital markets. The government should, however, discount pre tax cash flows at the pre-tax discount rate, for it receives all tax revenues. Copyright 1997 by Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.