Infrastructure Compression and Public Sector Solvency in Latin America
Public investment and infrastructure spending are often singled out for drastic cuts at times of fiscal retrenchment. Fiscal austerity in Latin America during the 1980s and 1990s was characterized by a sharp contraction in infrastructure spending. In 5 of the 9 major Latin American countries, infrastructure investment cuts contributed half or more of the total fiscal adjustment. However, the compression of infrastructure spending does not guarantee the sustainability of the public sector. Infrastructure spending cuts not only reduce the public deficit (thereby raising the public sector’s net worth) but also leads to a decline in infrastructure stock accumulation and in output growth as well. This in turn implies a reduction in the economy’s debt-servicing capacity, thus weakening the public sector net worth (Easterly, 2001). In the present paper we quantitatively assess the growth cost of public infrastructure compression for major Latin American economies during the fiscal austerity period of the 1980s and 1990s, and examine the effectiveness of infrastructure spending cuts as a device to enhance public sector solvency.
|Date of creation:||Oct 2002|
|Date of revision:|
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
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.:
- Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, December.
- Röller, Lars-Hendrik & Waverman, Leonard, 2000.
"Telecommunications Infrastructure And Economic Development: A Simultaneous Approach,"
CEPR Discussion Papers
2399, C.E.P.R. Discussion Papers.
- Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
- Lars-Hendrik Röller & Leonard Waverman, 1996. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," CIG Working Papers FS IV 96-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:187. 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: (Claudio Sepulveda)
If references are entirely missing, you can add them using this form.