The Welfare Multiplier of Public Infrastructure Investment
IMF Working Papers, February 29, 2016
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- The Welfare Multiplier of Public Infrastructure Investment
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Bibliographic details
- Authors: Giovanni Ganelli, Juha Tervala
- Published: February 29, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475516678.001
Summary and approach
- Research question: Welfare multipliers of public spending (the consumption equivalent change in welfare for one dollar change in public spending).
- Model: DSGE model.
Key findings
- 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.
- Interpretation: A dollar spent by the government for investment raises domestic welfare by equivalent of 0.8 dollars of private consumption.
- Policy implication: The welfare gains of public infrastructure investment, if chosen wisely, may be substantial.
Subjects and keywords
- Subject: Consumption, Expenditure, Infrastructure, National accounts, Public investment and public-private partnerships (PPP), Public investment spending
- Keywords: Consumption, Global, Infrastructure, infrastructure investment, investment shock, net present value, output elasticity, output multiplier, Public Infrastructure, Public Investment, Public investment and public-private partnerships (PPP), Public investment spending, public spending, Welfare, welfare multiplier, WP