Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure

Rioja, Felix

doi:10.1016/s0047-2727(01)00200-6

Cited by 118 publications

(109 citation statements)

References 20 publications

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“…Without corrective action, poor roads-as well as inadequate road-based (public and private) transport-can become an insurmountable obstacle to the economic recovery and growth of developing cities. Current evidence suggests that, in developing cities, maintenance expenditures have a positive effect on economic output whereas the construction of new highly-visible road infrastructure is less beneficial for economic development [21,22].…”

Section: Road Infrastructurementioning

confidence: 99%

Sustainable Urban Transport in the Developing World: Beyond Megacities

2015

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Abstract:Megacities have frequently received a disproportionate amount of attention over other sizes of cities in recent discourse on urban sustainability. In this article, the authors argue that a focus on smaller and medium-sized cities is crucial to achieving substantial progress towards more sustainable urban development, not only because they are home to at least a quarter of the world's population but because they also offer great potential for sustainable transformations. In principle, their size allows for flexibility in terms of urban expansion, adoption of "green" travel modes, and environmental protection. At the same time, smaller and medium-sized cities often have fewer resources to implement new transport measures and can be more vulnerable to fluctuations in the world economy. This article critically reviews the potential role and impact of nine commonly considered options for sustainable urban transport in cities in developing countries: (1) road infrastructure; (2) rail-based public transport; (3) road-based public transport; (4) support for non-motorized travel modes; (5) technological solutions; (6) awareness-raising campaigns; (7) pricing mechanisms; (8) vehicle access restrictions; and (9) control of land-uses. Drawing on international research and examples of policies to reduce the environmental impacts of transport in urban areas, this article identifies some key lessons for sustainable urban transport in smaller and medium-sized cities in developing countries. These lessons are certainly not always identical to those for megacities in the global south. OPEN ACCESSSustainability 2015, 7 7785

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Section: Road Infrastructurementioning

confidence: 99%

Sustainable Urban Transport in the Developing World: Beyond Megacities

2015

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“…Heller (1974Heller ( , 1979 emphasizes that a predictables level of expenditure to cover recurrent capital costs is crucial to harness the productivity gains of capital investment. Following Rioja (2003), the model used here assumes that the depreciation rate of public capital rises with insufficient spending for maintenance and operation. This also captures stop-and-go types of scaling-up plans, which can lower returns to investment projects.…”

Section: A Brief Literature Reviewmentioning

confidence: 99%

Investing Volatile Oil Revenues in Capital-Scarce Economies: An Application to Angola

Richmond

Yackovlev²,

Yang³

2013

IMF Working Papers

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Natural resource revenues are an increasingly important financing source for public investment in many developing economies. Investing volatile resource revenues, however, may subject an economy to macroeconomic instability. This paper applies to Angola the fiscal framework developed in Berg et al. (forthcoming) that incorporates investment inefficiency and absorptive capacity constraints, often encountered in developing countries. The sustainable investing approach, which combines a stable fiscal regime with external savings, can convert resource wealth to development gains while maintaining economic stability. Stochastic simulations demonstrate how the framework can be used to inform allocations between capital spending and external savings when facing uncertain oil revenues. An overly aggressive investment scaling-up path could result in insufficient fiscal buffers when faced with negative oil price shocks. Consequently, investment progress can be interrupted, driving up the capital depreciation rate, undermining economic stability, and lowering the growth benefits of public investment. JEL Classification Numbers: Q32, E22, F43, O41

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“…To capture the idea that lack of maintenance shortens the life of existing capital, we follow Rioja (2003) to model the depreciation rate as a decreasing function of investment expenditure:…”

Section: Investment Efficiency and Absorptive Capacity Constraintsmentioning

confidence: 99%

“…Policy makers and the literature on public infrastructure generally recognize that large-scale public investment programs are important to speed up economic development. However, as emphasized by Heller (1974) and Rioja (2003), on-going expenditures to cover recurrent costs for operation and maintenance (to avoid faster capital depreciation by "filling the potholes") are crucial to have investment projects remain productive in the medium to long term. By making explicit the financing needs to maintain capital, our sustainable investing approach suggests that, when revenue mobilization is difficult or the distorting effects of fiscal adjustments are large, the investment scaling-up should be reduced.…”

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confidence: 99%

Public Investment in Resource-Abundant Developing Countries

et al. 2012

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Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of investing natural resource revenues, making explicit the role of pervasive features in these countries including public investment inefficiency, absorptive capacity constraints, Dutch disease, and financing needs to sustain capital. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. Using the model, country applications show how combining public investment with a resource fund-a sustainable investing approach-can help address the macroeconomic problems associated with both exhaustibility and volatility. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up(accounting for the financing needs to sustain capital) and the adequate size of a stabilization fund (buffer). JEL Classification Numbers: Q32, E22, F43, O41

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Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure

Cited by 118 publications

References 20 publications

Sustainable Urban Transport in the Developing World: Beyond Megacities

Sustainable Urban Transport in the Developing World: Beyond Megacities

Investing Volatile Oil Revenues in Capital-Scarce Economies: An Application to Angola

Public Investment in Resource-Abundant Developing Countries

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