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This paper provides the first EU wide analysis of the variation in Capacity Remuneration Requirements throughout Europe which aim to resolve the 'missing money' problems in various member states. The findings of this analysis point to an asymmetric investment case for gas-fired peaking power plants throughout the EU. Under the assumptions of the European Commission Reference Scenario, pan-European power optimisation and investment models are specified for 2030. The results show that future investment in gas generators will depend on the availability of capacity payments. Capacity remuneration mechanisms can provide this 'missing money,' but we show that capacity remuneration requirements vary considerably across countries. We consider and model the impacts of country specific climate policy targets, sovereign risk, capital allowances, corporate taxes and future gas network tariffs on investor returns and therefore remuneration requirements. In the context of harmonised energy trading, this raises questions of how generation adequacy should be achieved, particularly in the context of higher penetrations of renewables. Keywords: Electricity investment, Gas, Market design, Capacity remuneration mechanisms, Missing money, 1. INTRODUCTION Harmonisation of the trading arrangements and regulations between connected electricity markets has produced efficiency gains in many regions and the economic case for further har-monisations has been persuasive [...]

In spite of ambitious investments by the Chinese government in renewable energy sources, the country's investment in coal power accelerated in recent years, raising concerns of massive overcapacity and undermining the central policy goal of promoting cleaner energy. In this paper, we ask why this happened, focusing on policies that incentivized excessive entry in the coal power sector and using a simple economic model to illustrate the policies' effects. Using coal-power project approval records from 2013 to 2016, we find the approval rate of coal power was about 3 times higher after approval authority was decentralized, with larger effects in regions producing more coal. We estimate that local coal production accounts for an additional 54GW of approved coal power in 2015 (other things equal), which is about 1/4 of total approved capacity in that year. Key words: Coal power, Renewable energy, Overinvestment, Industrial policy, Political economy, China, 1. INTRODUCTION Since 2005, the Chinese government has engaged in an ambitious effort to move China's energy system away from coal and towards more environmentally friendly sources of energy. The [...]

This study used the opportunity to conduct a survey with a contingent valuation method scenario in the weeks prior to an actual referendum on bidding for the 2024 Olympic Summer Games in Hamburg. Only 41.2% of respondents planned to vote favorably and 30.1% reported a positive willingness-to-pay. We allowed respondents to state the institution they would give the money to ensure it is wisely spent. The preferred institutions were a foundation and an account in trust. The findings indicate that individual voters have their own complex utility function of costs and benefits which should be considered by public officials.(JEL H41, L83, Z23, Z28), I. INTRODUCTION Referenda have proven informative about whether the population supports government spending on large-scale projects (Horn, Cantor, and Fort 2015). Likewise, referenda have become popular in recent years to [...]

Abstract Federal debt is on an unsustainable path. Low interest rates mean that we do not need to reduce budget deficits immediately and that we should do more public investment. [...]

This article analyzes whether public investment has crowded out private investment in Bolivia during the 1988-2010 period. The evidence demonstrates that this is generally the case, as public investment has been shown to consistently run counter-clockwise to private investment. Interestingly, the quality of the institutional setting and the openness of the economy to trade with other nations do not seem to matter to the relation between public investment and private investment. The findings suggest, however, that increases in domestic credit to the private sector lessen the crowding-out effect, which calls attention to the importance of a stable and healthy financial system as a way to encourage private investment. El articulo analiza si la inversion publica ha desplazado a la inversion privada en Bolivia durante el periodo 1988-2010. La evidencia demuestra que este es generalmente el caso, ya que, de manera consistente durante todo el periodo analizado, la inversion publica avanza de manera contra-ciclica a la inversion privada. Curiosamente, la calidad del marco institucional y la apertura de la economia al comercio con otros paises parecen no afectar la relacion entre inversion publica y privada. Los resultados sugieren, sin embargo, que incrementos en el credito domestico al sector privado disminuyen el desplazamiento generado por la inversion publica, resaltando la importancia de mantener un sistema financiero estable y solido como instrumento de promocion de la inversion privada en el pais., This article analyzes whether public investment has crowded out private investment in Bolivia since 1988. (1) The findings suggest that this is generally the case, as public investment consistently has [...]

This article examines the quantitative interrelations between sectoral composition of public spending and equilibrium (in)determinacy in a two-sector real business cycle model with positive productive externalities in investment. When government purchases of consumption and investment goods are set as constant fractions of their respective sectoral output, we show that the public-consumption share plays no role in the model's local dynamics, and that a sufficiently high public-investment share can stabilize the economy against endogenous belief-driven cyclical fluctuations. When each type of government spending is postulated as a constant proportion of the economy's total output, we find that there exists a trade-off between public consumption versus investment expenditures to yield saddle-path stability and equilibrium uniqueness. (JEL E32, E62, O41), I. INTRODUCTION One of the central paradigms in modern macroeconomic research is known as the real business cycle (RBC) theory pioneered by Kydland and Prescott (1982). The basic idea of [...]

The paper analyzes the optimal level of decentralization in local-public-good provision. Although all voters pay for such investments, only a subset benefit from them; their rate of return, however, is positive. Through pork-barrel projects, which do not increase welfare, any resource allocation is realizable. Candidates competing in local and national elections therefore face a trade-off between targetability and efficiency, which causes some profitable projects to be discarded. Decentralization affects underinvestment because the share of the electorate who benefit from an investment and the share of total budget absorbed by its costs depend on the size of that electorate. (JEL: D 72, H 41)

How public capital, private investment, and taxation are interrelated is investigated in a UK setting, in which a public capital deficit could happen. Increased UK investment in roads and implementation of an efficient national road-pricing scheme are called for. The influence of transport infrastructure to economic productivity in the context of cost-benefit analysis is also discussed.

We show that the composition of government spending influences the long-run behavior of the real exchange rate. We develop a two-sector small open-economy model in which an increase in government consumption is associated with real appreciation, while an increase in government investment may generate real depreciation. Our empirical work confirms that government consumption and government investment have differential effects on the real exchange rate and the relative price of nontradables. JEL codes: E62, F31, F41 Keywords: government consumption, government investment, real exchange rate., IN RECENT YEARS, there has been a resurgence of interest in the long-run behavior of real exchange rates. Along one dimension, the role of an 'undervalued' real exchange rate in [...]

A study was conducted to examine duopolistic pricing by ports that are congestible and share the same overseas customers. Findings indicate that profit-maximizing ports internalize hinterland congestion in as far as it affects customers. The policy implications of the study's results are also discussed.

This paper presents a dynamic macroeconomic model that captures key linkages between foreign aid, public investment, growth, and poverty. Public capital is disaggregated into education, core infrastructure, and health. Dutch disease effects associated with aid are accounted for by endogenizing changes in the relative price of domestic goods. The impact of shocks on poverty is assessed through partial elasticities and household survey data. The model is calibrated for Ethiopia and changes in the level of nonfood aid are simulated. The amount by which (nonfood) aid should increase to reach the poverty targets of the Millennium Development Goals is also calculated, under alternative assumptions about the degree of efficiency of public investment. JEL classification: F35; H54; I32 Keywords: Foreign aid; Public investment; Growth; Poverty reduction

Pr evailing economic theory and in particular theories of economic growth have contributed significantly to the diminution of government's role. Keeping the traditional theory and offering a more comprehensive theory of g rowth is proposed.

This paper examines the link between foreign aid, economic growth, and welfare in a small open economy. External transfers impinge on the recipient's macroeconomic performance by affecting resource allocation decisions and relative prices. The endogeneity of the labor-leisure choice plays a crucial role in the propagation of foreign aid shocks. The efficacy of foreign aid also depends on externalities associated with the public good that it helps finance. The impact of tied and untied aid on the recipient government's intertemporal fiscal balance is examined. Finally, the transitional adjustment to a foreign aid shock is shown to be sensitive to the elasticity of substitution in production and the relative importance of the labor-leisure choice in utility. JEL classification: E6; F4; O1 Keywords: Foreign aid; International transfers; Endogenous labor; Economic growth; Public investment

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jmacro.2004.07.011 Byline: Stephen J. Turnovsky (a), Mihaela Pintea (b) Keywords: Public investment; Two-sector economy Abstract: We develop a two-sector growth model in which there are conventional profit-maximizing private firms, together with 'public firms', whose objective is to produce a specified quantity of government investment goods - determined by government policy - at minimum cost. We characterize the equilibrium dynamics, and analyze a variety of fiscal disturbances, by simulating a calibrated economy. The effects of different policies, normalized in terms of their impact on the government's intertemporal deficit, are compared. We find that the effects of tax policies are robust with respect to the relative capital intensities of the two productive sectors. However, the effects of government investment are much more sensitive to this aspect. Author Affiliation: (a) Department of Economics, University of Washington, P.O. Box 353330, Seattle, WA 98195 3330, United States (b) Florida International University, Miami, FL, United States Article History: Received 3 September 2003; Accepted 19 July 2004

The adverse implications of competition for public investments in infrastructure are discussed. The reasons for such adverse outcomes are analyzed. Under non-competitive environment, public investment in infrastructure fosters development of regional economy by drawing in resources like skilled labor.

Cointegrated vector autoregression methods, which are used to examine the impact of human capital and public investments on economic growth of Portugal for the period 1960-2001, are presented.

Econometric models, which examine the effect of public investment on national and regional economies of South Korea, is examined.

A study examining the optimal public capital required for obtaining optimal private capital productivity, which in turn leads to economic growth and regional development, is presented. The study is based on data from Spanish regions.

This paper uses multiple regression analysis to determine the extent to which the regional distribution of public investment policies before and after the Mexican debt crisis and the opening of the country to trade have responded primarily to efficiency or redistribution criteria. The results highlight that the regional allocation of public investment funds in Mexico since 1970 seems to follow neither redistribution, nor efficiency criteria. In addition, there is no evidence that the allocation of funds has a positive effect on regional growth. The most likely explanation is that pork-barrel politics has played a key role in the regional distribution of funds, and probably has contributed to lowering their economic impact. Key words--public investment, efficiency, redistribution, growth, pork barrel politics, regions, Mexico

The competition between the governments in investing in the public facilities is analyzed. The discreet nature of their choices, spatial relationships, strategic interactions are given special attention in the analysis. The decision making process has been divided in to two parts in the linear economy in this study.

A model studying the liquidity of governments, the efficient methods of investing this liquidity and the usage of liquidity in bank bailouts is presented.

Decentralization increases the responsiveness of public investment, is examined by referring a unique database from Bolivia. Different tests are conducted to show that, investment patterns in human capital and social services change significantly after decentralization.

Governments should choose a different composition of public investment for different regions. Although most investment projects have a large local effect, in most cases, their benefits reach citizens in other regions.

The effect of public infrastructure on private factor productivity and efficiency in the Spanish regions is analyzed. The results indicate that, although public investment contributes to enhance private productivity growth, the less productive regions are suffering from a relative deficit of private capital

In the United Kingdom, public investment, as defined as spending (or investment) on fixed assets either for new purchases or repairs or replacement, fell from 7% of gross domestic product in 1983 to 2.5% of GDP by 2001, while net capital formation (Net investment) dropped from 4% to 0.7% in the same time period. The difficulties in measuring public investment, possible reasons for the drop in public investment, public investment by sub-sector, and the general government investment by program are discussed.

Byline: Etsuro Shioji (1) Keywords: economic growth; income convergence; public capital; panel data; GMM Abstract: This paper estimates dynamic effects of public capital on output per capita. Based on an open economy growth model, I derive a version of the income convergence equation augmented with public capital. This equation is estimated using panel data of United States and Japanese regions. Sensible results are obtained when public capital is disaggregated into components. In both countries, the infrastructure component of public capital turns out to have significantly positive effects. The implied elasticity of output with respect to infrastructure is somewhere around 0.1 to 0.15. This suggests a modest contribution of infrastructure to postwar growth of the two countries. Author Affiliation: (1) Department of Economics, Yokohama National University, 79-3 Tokiwadai, Hodogaya-ku, Yokohama, 240-8501, Japan Article History: Registration Date: 07/10/2004

The standard plant location problem determines which plants to open from a set of potential sites in order to satisfy the demands at a set of customer vertices at a minimum total cost. However, the optimal solution may exceed a limit on investment costs imposed on the enterprise in a practical setting. This paper examines the plant location problem in an environment in which the investment in plant and equipment is also an objective to be minimised. The problem is posed as a bicriterion model which examines the tradeoff between the sum of operational and investment costs and investment cost (or total cost vs sunk cost). A weighting method is used to generate efficient solutions, one of which is shown to maximise the return on investment. The integer-friendliness of the LP relaxation is investigated.

Byline: Raymond G. Batina (1) Keywords: Public capital; cointegration; VAR model; error correction model Abstract: We study the cointegration properties of data on aggregate output, five proxies for labor, two proxies for private capital, public capital, and disaggregated public capital for the United States for 1948--1993. We find evidence of multiple cointegrating vectors we typically find three or four cointegrating vectors depending on which combination of proxies is evaluated. When public capital is disaggregated by type there is less evidence for cointegration. Finally, innovations in public capital have long lasting effects on output, labor, and private capital, and innovations to output, labor, and private capital also have long lasting effects on public capital. Author Affiliation: (1) Department of Economics, Washington State University, Pullman, WA, 99164-4741 Article History: Registration Date: 30/09/2004

Byline: Alfred Greiner (1), Horst Hanusch (1) Keywords: Public capital; endogenous growth; fiscal policy; welfare Abstract: In this paper we analyze growth and welfare effects of fiscal policy in an endogenous growth model along the balanced growth path. As to the model we assume that sustained per capita growth results from public investment. The government uses its tax revenue for investment in public capital, for investment subsidy and for transfer payments. We then analyze how the balanced growth rate reacts to variations in those policy variables. Further, we study welfare effects of varying the fiscal parameters and demonstrate that, in general, maximizing economic growth is not equivalent to maximizing welfare on the balanced growth path. Author Affiliation: (1) Department of Economics, University of Augsburg, 86135, Augsburg, Germany Article History: Registration Date: 30/09/2004

The article explores the effects of public expenditures on growth among 73 countries over the 1970-89 period. While much of the literature attributes weak growth to public investment and social expenditures which inhibit growth through crowding-out and rent-seeking, the article highlights the contributions that public investment and social expenditures may make to growth. The article's econometric analysis suggests that crowding-out and rent-seeking concerns may have been overstated in the literature., INTRODUCTION Varying economic performances in the developing and developed worlds over the past two decades continue to absorb policymakers and theorists. The conventional explanation for these varying performances holds that [...]

A fiscal federalism approach on infrastructure guidelines shows the actual apportionment of the obligation for the provision of public capital in the US. The national infrastructure guideline's incongruity with the foundations of fiscal federalism in several key issues is also noted. Prospective study should concentrate on recognizing the types of investments where there are large spillovers and on measuring those external benefits.

The aim of this paper is to investigate the conditions under which public investment can be allocated to the infrastructure in material and non-material capital so as to have a positive effect on regional development and interregional inequality. To investigate this issue, the paper focuses on the externalities created by investing in infrastructure for the transfer of information, know-how or technical knowledge., Local development policy, which aims to bring about development in a region through the radical change in its political and economic structure, is compatible with regional development policy in achieving balanced regional development. For a region to achieve development, it is necessary to have public investment in both the material and the non-material infrastructures such as the the building of research centers and the upgrading of communication and information networks. However, non-material public capital results to a smaller change in development compared to material public capital.

Using reasonably good data for 1973-80, 1980-85 and 1985-90 for 53 developing countries, fairly standard growth models are estimated to compare the productivity of public investment with that of private investment. The main point noted is that public investment appears more productive than private investment in at least as many instances as suggest the opposite. Much caution is, therefore, urged in making strong claims about the productivity of private investment in developing countries being higher than that of public investment.