Public Investment, Public Finance, and Growth: The Impact of Distortionary Taxation, Recurrent Costs, and Incomplete Appropriability

 
Author/Editor: Christopher Adam ; David Bevan
 
Publication Date: May 01, 2014
 
Electronic Access: Free Full text (PDF file size is 689KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Effective public investment requires governments to address the "recurrent cost problem" to ensure operations and maintenance (O&M) expenditures are sufficient to sustain the flow of productive public capital services to private factors of production. Building on the model of Buffie et al (2012), this paper explores the macroeconomic implications of this recurrent cost problem and its resolution in a context that recognizes that taxation is distortionary. The model is also used to examine stylized fiscal reforms including the replacement of a distortionary output tax with a uniform consumption tax and budgetary reforms that restore O&M expenditures to their efficient levels. These experiments are stylized but clearly demonstrate the material consequences of the tax and public expenditure structures for growth and debt sustainability in low-income countries.
 
Series: Working Paper No. 14/73
Subject(s): Public investment | Government expenditures | Budgetary reforms | Taxation | Consumption taxes | Public finance | Economic growth | Low-income developing countries

 
English
Publication Date: May 01, 2014
ISBN/ISSN: 9781484364819/1018-5941 Format: Paper
Stock No: WPEIA2014073 Pages: 43
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
Please address any questions about this title to publications@imf.org