The public finance of infrastructure : issues and options
Using economic principles, the author provides criteria for financing infrastructure services where consumption-related user charges can be levied effectively. In light of the suggested criteria, the author examines the experience of developing countries in financing publicly provided infrastructure services in transport (road), water, telecommunications, and power. In developing countries, most infrastructure is provided by the public sector, although the private sector has become increasingly involved. Because it is difficult to raise funds through general taxes, self financing of these services remains a desirable second-best policy, one that almost all developing countries endorse. But experience suggests that, except in telecommunications, full cost recovery is more the exception than the rule. Financing remains inadequate. The political economy of tariff setting is an important element in low improperly designed user charges, infrequent adjustments for inflation, and poor enforcement. Such sectors as water, power, and transportation drains funds from the treasury, although their impact varies from sector to sector. When it is difficult to get budget transfers to materialize - especially during a fiscal crisis - there is often a reduction in nonwage operations and maintenance expenditures. As a result, services deteriorate. The private provision of infrastructure services is often suggested as an alternative. The private provision of services can certainly reduce the public sector's financing requirement. For infrastructure services for which technological advances have made competition possible, the market system could ensure efficient private provision of services, which could be a relief to the public sector. But for services that require a single provider to achieve economies of scale and similar benefits, the private provision of services will work only if an appropriate rate of return is assured - and only if user charges cover costs.
|Date of creation:||30 Apr 1994|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
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.:
- Aschauer, David Alan, 1989.
"Is public expenditure productive?,"
Journal of Monetary Economics,
Elsevier, vol. 23(2), pages 177-200, March.
- David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
- Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1993. "What do governments buy?," CEMA Working Papers 513, China Economics and Management Academy, Central University of Finance and Economics.
- Baffes, John & Shah, Anwar, 1998. "Productivity of Public Spending, Sectoral Allocation Choices, and Economic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 46(2), pages 291-303, January.
- Baffes, John & Shah, Anwar, 1993. "Productivity of public spending, sectoral allocation choices, and economic growth," Policy Research Working Paper Series 1178, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1288. 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.