Arbeitspapier
Public investment as commitment
Should public assets such as infrastructure, education, and the environment earn the same return as private investments? The long-term nature of public investments provides commitment to current preferences, which justifies lower than private returns for time-inconsistent decision markers. An institutionalized (i.e., exogenous) rule demanding equalized comparable returns removes the bias and implements the standard cost-benefit requirement. We show that such a stand-alone rule has no general welfare content: it implements Pareto efficiency if and only if preferences are time-consistent. Efficiency requires rules not only for the composition of investments but also for overall savings. Without supplementary rules for savings, accepting lower returns for long-term public assets is welfare improving.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 3330
- Classification
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Wirtschaft
Project Evaluation; Social Discount Rate
Public Goods
Allocative Efficiency; Cost-Benefit Analysis
Climate; Natural Disasters and Their Management; Global Warming
Macroeconomics: Consumption; Saving; Wealth
- Subject
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public investments
cost-benefit analysis
inconsistent preferences
Öffentliche Investition
Kosten-Nutzen-Analyse
Zeitkonsistenz
Wohlfahrtseffekt
Theorie
- Event
-
Geistige Schöpfung
- (who)
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Gerlagh, Reyer
Liski, Matti
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2011
- Handle
- Last update
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10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Gerlagh, Reyer
- Liski, Matti
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2011