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Complementarity and the Discount Rate for Public Investment

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  • David F. Burgess

Abstract

The marginal rate of return on public investment in a tax-distorted economy is a weighted average of the marginal social productivity of capital in the private sector and the marginal social rate of time preference, but the weights are shown to depend not only on the proportions of funding obtained from each source through incremental borrowing but also on the degree of complementarity or substitutability between public and private investment.

Suggested Citation

  • David F. Burgess, 1988. "Complementarity and the Discount Rate for Public Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 527-541.
  • Handle: RePEc:oup:qjecon:v:103:y:1988:i:3:p:527-541.
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    File URL: http://hdl.handle.net/10.2307/1885543
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    Cited by:

    1. Marattin, Luigi & Salotti, Simone, 2011. "On the usefulness of government spending in the EU area," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 780-795.
    2. Hiroki Tanaka & Masahiro Hidaka, 2011. "Dynamic Tax Competition under Asymmetric Productivity of Public Capital," ERSA conference papers ersa10p1033, European Regional Science Association.
    3. Ihori, Toshihiro, 1995. "Public policy and economic growth: Japan and the United States," Japan and the World Economy, Elsevier, vol. 7(1), pages 113-130, May.
    4. David Burgess, 2008. "Removing Some Dissonance From the Social Discount Rate Debate," University of Western Ontario, Economic Policy Research Institute Working Papers 20082, University of Western Ontario, Economic Policy Research Institute.
    5. Burgess, David F., 2013. "Reconciling alternative views about the appropriate social discount rate," Journal of Public Economics, Elsevier, vol. 97(C), pages 9-17.
    6. David Burgess, 2006. "Public Investment Criteria in Overlapping Generations Models of Open Economies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(1), pages 59-78, January.
    7. Liu, Liqun, 2003. "A marginal cost of funds approach to multi-period public project evaluation: implications for the social discount rate," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1707-1718, August.
    8. Liqun Liu, 2005. "The Multi-Period Cost-Benefit Rule with Mobile Capital and Distorted Labor," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(2), pages 145-158, March.

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