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Year: 2007 Publisher: Washington, D.C., The World Bank,
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Given that public spending will have a positive impact on GDP if the benefits exceed the marginal cost of public funds, the present paper deals with measuring costs and benefits of public spending. The paper discusses one cost seldom considered in the literature and in policy debates, namely, the volatility derived from additional public spending. The paper identifies a relationship between public spending volatility and consumption volatility, which implies a direct welfare loss to society. This loss is substantial in developing countries, estimated at 8 percent of consumption. If welfare losses due to volatility are this sizeable, then measuring the benefits of public spending is critical. Gauging benefits based on macro aggregate data requires three caveats: a) considering of the impact of the funding (taxation) required for the additional public spending; b) differentiating between investment and capital formation; c) allowing for heterogeneous response of output to different types of capital and differences in network development. It is essential to go beyond country-specificity to project-level evaluation of the benefits and costs of public projects. From the micro viewpoint, the rate of return of a project must exceed the marginal cost of public funds, determined by tax levels and structure. Credible evaluations require microeconomic evidence and careful specification of counterfactuals. On this, the impact evaluation literature and methods play a critical role. From individual project evaluation, the analyst must contemplate the general equilibrium impacts. In general, the paper advocates for project evaluation as a central piece of any development platform. By increasing the efficiency of public spending, the government can permanently increase the rate of productivity growth and, hence, affect the growth rate of GDP.
Access to Finance --- Debt Markets --- Economic efficiency --- Economic Theory and Research --- Finance and Financial Sector Development --- Macroeconomics and Economic Growth --- Public --- Public debt --- Public debt management --- Public Expenditure --- Public expenditure management --- Public funds --- Public Sector Economics and Finance --- Public Sector Expenditure Analysis and Management --- Public spending --- Tax --- Taxation
Book
Year: 2007 Publisher: Washington, D.C., The World Bank,
Abstract | Keywords | Export | Availability | Bookmark
Loading...Choose an application
- Reference Manager
- EndNote
- RefWorks (Direct export to RefWorks)
This paper uses an analytically tractable intertemporal framework for analyzing the dynamic pricing of a utility with an underdeveloped network (a typical case in most developing countries) facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of a retaliatory regulatory review that is increasing with the price it charges. This simple dynamic optimization model yields a number of powerful policy insights and conclusions. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises restraint in the early stages of network development by holding price below the limit defined by the unit costs of the fringe. The utility's optimal price gradually converges toward the limit price as its network expands. Moreover, when the utility is threatened with retaliatory regulatory intervention, it will generally have incentives to restrain its pricing behavior. These findings have important implications for the design of post-privatization regulatory governance in developing countries.
Choice --- Consumers --- Costs --- Debt Markets --- Demand --- Discount Rate --- Diseconomies of Scale --- E-Business --- Economic Efficiency --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Incentives --- Investment --- Low Tariffs --- Macroeconomics and Economic Growth --- Marginal Costs --- Markets and Market Access --- Monopoly --- Optimization --- Prices --- Pricing --- Private Sector Development --- Profit Maximization --- Profits --- Urban Water Supply and Sanitation --- Utility --- Variables --- Water Supply and Sanitation --- Welfare
Book
Year: 2007 Publisher: Washington, D.C., The World Bank,
Abstract | Keywords | Export | Availability | Bookmark
Loading...Choose an application
- Reference Manager
- EndNote
- RefWorks (Direct export to RefWorks)
Given that public spending will have a positive impact on GDP if the benefits exceed the marginal cost of public funds, the present paper deals with measuring costs and benefits of public spending. The paper discusses one cost seldom considered in the literature and in policy debates, namely, the volatility derived from additional public spending. The paper identifies a relationship between public spending volatility and consumption volatility, which implies a direct welfare loss to society. This loss is substantial in developing countries, estimated at 8 percent of consumption. If welfare losses due to volatility are this sizeable, then measuring the benefits of public spending is critical. Gauging benefits based on macro aggregate data requires three caveats: a) considering of the impact of the funding (taxation) required for the additional public spending; b) differentiating between investment and capital formation; c) allowing for heterogeneous response of output to different types of capital and differences in network development. It is essential to go beyond country-specificity to project-level evaluation of the benefits and costs of public projects. From the micro viewpoint, the rate of return of a project must exceed the marginal cost of public funds, determined by tax levels and structure. Credible evaluations require microeconomic evidence and careful specification of counterfactuals. On this, the impact evaluation literature and methods play a critical role. From individual project evaluation, the analyst must contemplate the general equilibrium impacts. In general, the paper advocates for project evaluation as a central piece of any development platform. By increasing the efficiency of public spending, the government can permanently increase the rate of productivity growth and, hence, affect the growth rate of GDP.
Access to Finance --- Debt Markets --- Economic efficiency --- Economic Theory and Research --- Finance and Financial Sector Development --- Macroeconomics and Economic Growth --- Public --- Public debt --- Public debt management --- Public Expenditure --- Public expenditure management --- Public funds --- Public Sector Economics and Finance --- Public Sector Expenditure Analysis and Management --- Public spending --- Tax --- Taxation
Book
Year: 2007 Publisher: Washington, D.C., The World Bank,
Abstract | Keywords | Export | Availability | Bookmark
Loading...Choose an application
- Reference Manager
- EndNote
- RefWorks (Direct export to RefWorks)
This paper uses an analytically tractable intertemporal framework for analyzing the dynamic pricing of a utility with an underdeveloped network (a typical case in most developing countries) facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of a retaliatory regulatory review that is increasing with the price it charges. This simple dynamic optimization model yields a number of powerful policy insights and conclusions. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises restraint in the early stages of network development by holding price below the limit defined by the unit costs of the fringe. The utility's optimal price gradually converges toward the limit price as its network expands. Moreover, when the utility is threatened with retaliatory regulatory intervention, it will generally have incentives to restrain its pricing behavior. These findings have important implications for the design of post-privatization regulatory governance in developing countries.
Choice --- Consumers --- Costs --- Debt Markets --- Demand --- Discount Rate --- Diseconomies of Scale --- E-Business --- Economic Efficiency --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Incentives --- Investment --- Low Tariffs --- Macroeconomics and Economic Growth --- Marginal Costs --- Markets and Market Access --- Monopoly --- Optimization --- Prices --- Pricing --- Private Sector Development --- Profit Maximization --- Profits --- Urban Water Supply and Sanitation --- Utility --- Variables --- Water Supply and Sanitation --- Welfare
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