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Financing Infrastructure

  • Luiz de Mello

    (Deputy Chief of Staff of the Secretary-General)

  • Douglas Sutherland


The need for infrastructure building, replacement and updating is large worldwide and governments - particularly subnational governments - will need to mobilise budgetary resources while simultaneously restoring public finances to sound health and meeting other spending pressures. This paper considers the factors affecting investment in infrastructure (with an emphasis on fixed networks), the specific characteristics of the different financing modalities applicable to subnational governments and highlights the challenges that are specific to subnational governments. In order to rise to the challenge, subnational governments will need to enhance their capacity to raise own revenue, to make the most of intergovernmental grants and transfers, and to mobilise private-sector funds, including by tapping capital markets, where permitted. In order to exploit fully the various financing options, subnational governments in many countries will need to strengthen their technical capacity to design and implement investment projects, as well as manage increasingly complex, multi-year budgets, especially when there is private sector involvement.

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper1409.

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Length: 25 pages
Date of creation: 14 Jan 2014
Date of revision:
Handle: RePEc:ays:ispwps:paper1409
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  1. Luiz R. De Mello Jr., 2001. "Fiscal Decentralization and Borrowing Costs: The Case of Local Governments," Public Finance Review, , vol. 29(2), pages 108-138, March.
  2. Hulten, Charles R. & Schwab, Robert M., 1997. "A fiscal federalism approach to infrastructure policy," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 139-159, April.
  3. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages C69-C76, March.
  4. Douglas Sutherland & Sónia Araújo & Balázs Égert & Tomasz Kozluk, 2011. "Public Policies and Investment in Network Infrastructure," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-23.
  5. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
  6. Sebastian G. Kessing & Kai A. Konrad & Christos Kotsogiannis, 2007. "Foreign direct investment and the dark side of decentralization," Economic Policy, CEPR;CES;MSH, vol. 22, pages 5-70, 01.
  7. Luiz de Mello & Santiago Lago-Peñas, 2012. "Local Government Cooperation for Joint Provision: The Experiences of Brazil and Spain with Inter-Municipal Consortia," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1218, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  8. Pranab Bardhan & Dilip Mookherjee, 2006. "Decentralisation and Accountability in Infrastructure Delivery in Developing Countries," Economic Journal, Royal Economic Society, vol. 116(508), pages 101-127, 01.
  9. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  10. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 421-442, March.
  11. Kappeler, Andreas & Välilä, Timo, 2008. "Fiscal federalism and the composition of public investment in Europe," European Journal of Political Economy, Elsevier, vol. 24(3), pages 562-570, September.
  12. Tomasz Koźluk, 2010. "How the Transport System can Contribute to Better Economic and Environmental Outcomes in the Netherlands," OECD Economics Department Working Papers 804, OECD Publishing.
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