Public Infrastructure Investment, Output Dynamics, and Balanced Budget Fiscal Rules

Bom, Pedro R. D.; Ligthart, Jenny E.

doi:10.2139/ssrn.1911164

Cited by 15 publications

(30 citation statements)

References 22 publications

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“…They find that that a permanent increase in public investment raises welfare in the long term if the output elasticity of public capital exceeds the public investment-to-GDP ratio which averages 3 percent in OECD countries. In line with the findings of Bom and Ligthart (2014), we find that the welfare multipliers of public infrastructure investment are sensitive to the output elasticity of public infrastructure. We find that the welfare multiplier is virtually zero when the output elasticity of public infrastructure is three percent.…”

Section: Introductionsupporting

confidence: 89%

“…All firms produce differentiated goods with a production function is the labor input, G t K is the stock of public infrastructure, and is the output elasticity of public infrastructure. We assume a positive  , which implies that the production function has increasing returns with respect to public infrastructure, as in Basu and Kollmann (2013), Bom and Ligthart (2014), Leduc and Wilson (2013) and Iwata (2013).…”

Section: Supply Side: Firmsmentioning

confidence: 99%

“…This can contribute to explain the large welfare gains that we derive from this kind of fiscal policy shock. Bom and Ligthart (2014) study the welfare effects of public infrastructure investment in a small-open economy. They find that that a permanent increase in public investment raises welfare in the long term if the output elasticity of public capital exceeds the public investment-to-GDP ratio which averages 3 percent in OECD countries.…”

Section: Introductionmentioning

confidence: 99%

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The Welfare Multiplier of Public Infrastructure Investment

Ganelli

Tervala²

2016

IMF Working Papers

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We analyze the welfare multipliers of public spending (the consumption equivalent change in welfare for one dollar change in public spending) in a DSGE model. The welfare multipliers of public infrastructure investment are positive if infrastructure is sufficiently effective. When the medium-term output multipliers are consistent with the empirical estimates (1-1.4), the welfare multiplier is 0.8. That is, a dollar spent by the government for investment raises domestic welfare by equivalent of 0.8 dollars of private consumption. This suggests that the welfare gains of public infrastructure investment, if chosen wisely, may be substantial.

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Section: Introductionsupporting

confidence: 89%

Section: Supply Side: Firmsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Welfare Multiplier of Public Infrastructure Investment

Ganelli

Tervala²

2016

IMF Working Papers

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“…In structural macroeconomic models public capital stock is often incorporated as an additional production factor, next to private capital stock and labour, by augmenting the production function (De Jong et al, 2017;Agénor and Neanidis, 2015;Bom and Ligthart, 2014a;Leeper et al, 2010;Baxter and King, 1993). Structural models provide a rich and economically intuitive framework for analysing public investment effects, but at the cost of imposing restrictions on the data.…”

Section: Macroeconomic Modelsmentioning

confidence: 99%

Public capital in the 21st century: as productive as ever?

2018

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The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for growth perspectives? Our main objective is to find out whether the importance of public capital for long run output growth has changed in recent years. We also aim to provide information on the relevance of international spillovers of public capital. To these ends, we expand time series on public capital stocks for 20 OECD countries as constructed by Kamps (2006) and estimate country-specific recursive VARs. Results show that the effect of public capital shocks on economic growth has not increased in general, although results differ widely between countries. This suggests that the current level of public investments generally does not pose an immediate threat to potential output. Of course, this could change if low investment levels are sustained for a long time. We furthermore provide some tentative evidence of positive spillovers of public capital shocks between European countries.

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“…In [8] several measures of selection quality and respective allocation rules for the multi-objective computing budget allocation problem are considered. In [9] dynamic macroeconomic effects of public infrastructure investment under a balanced budget fiscal rule, using an overlapping generations model of a small open economy are considered.…”

Section: Introductionmentioning

confidence: 99%

Budget allocation planning for multi-sectoral investments

Balykina

Zakharov

2015

2015 International Conference "Stability and Control Processes" in Memory of V.I. Zubov (SCP)

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The budget system of any local authorities and government provides the means to decide how much money to spend or how many resources to allocate to government institutions or agencies for the purposes of regional socialeconomic development. In the paper the Rolling Support Planning Algorithm (RSP Algorithm) is represented, which can be used for budget allocation for a given time horizon based on Key Performance Indicators (KPIs) which are formed by the budget framework policy context. This algorithm allows to solve the budget allocation problem in the case when achievement of target values of KPIs are planned in different future periods.

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Public Infrastructure Investment, Output Dynamics, and Balanced Budget Fiscal Rules

Cited by 15 publications

References 22 publications

The Welfare Multiplier of Public Infrastructure Investment

The Welfare Multiplier of Public Infrastructure Investment

Public capital in the 21st century: as productive as ever?

Budget allocation planning for multi-sectoral investments

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