Journal of Economic Growth

, Volume 17, Issue 3, pp 235–266 | Cite as

Investing in public investment: an index of public investment efficiency

  • Era Dabla-Norris
  • Jim Brumby
  • Annette Kyobe
  • Zac Mills
  • Chris Papageorgiou
Article

Abstract

Pritchett (J Econ Growth 5:361–384, 2000) convincingly argued that the difference between investment cost and capital value is of first-order empirical importance especially for developing countries where public investment is the primary source of investment. This paper constructs a public investment efficiency index that captures the institutional environment underpinning public investment management across four different stages: project appraisal, selection, implementation, and evaluation. Covering 71 countries, including 40 low-income countries, the index allows for benchmarking across regions and country groups and for nuanced policy-relevant analysis and identification of specific areas where reform efforts could be prioritized. Research applications are outlined.

Keywords

Public investment Public investment management Project appraisal Selection Implementation Evaluation Growth 

JEL Classification

O19 O23 O47 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Agénor P.-R. (2010) A theory of infrastructure-led development. Journal of Economic Dynamics and Control 34: 932–950CrossRefGoogle Scholar
  2. Allen, R., & Daniel, T. (2001). Managing public expenditure: A reference book for transition countries. Paris: OECD Sigma. http://www1.worldbank.org/publicsector/pe/oecdpemhandbook.pdf.
  3. Andrews, M. (2010). How far have public financial management reforms come in Africa? Harvard Kennedy School, Research Working Papers No. 10-018.Google Scholar
  4. Barro R. J. (1990) Government spending in a simple endogenous growth model. Journal of Political Economy 98: 103–125CrossRefGoogle Scholar
  5. Buffie, E., Berg, A., Pattillo, C., Portillo, R., & Zanna, L. F. (2011). Public investment, growth, and debt sustainability: Putting together the pieces. Unpublished working paper, IMF.Google Scholar
  6. Calderon, C., & Serven, L. (2008). Infrastructure and economic development in Sub-Saharan Africa. World Bank Policy Research Working Paper.Google Scholar
  7. Caselli, F. (2005). Accounting for cross-country income differences. Handbook of economic growth (Chap. 4, pp. 679–741).Google Scholar
  8. Caselli F., Feyrer J. (2007) Marginal product of capital. Quarterly Journal of Economics 122: 535–568CrossRefGoogle Scholar
  9. Chakraborty, S., & Dabla-Norris, E. (2011). The quality of public investment. The B.E. Journal of Macroeconomics (Contributions), 11: Article 27.Google Scholar
  10. Collier P. (2010) The plundered planet. Oxford University Press, OxfordGoogle Scholar
  11. Collier P., van der Ploeg F., Spence M., Venables A.J. (2010) Managing resource revenues in developing countries. IMF Staff Papers, 57: 84–118CrossRefGoogle Scholar
  12. Collier, P., & Venables, A. (2008). Managing resource revenues: Lessons for low income countries. In African economic research consortium 2008 annual conference.Google Scholar
  13. Dabla-Norris, E., Allen, R., Zanna, L.-F., Prakash, T., Kvintradze, E., Lledo, V., Yackovlev, I., & Gollwitzer, S. (2010). Budget institutions and fiscal performance in low-income countries. IMF Working Paper WP/10/80, Washington, DC.Google Scholar
  14. Diamond, J. (2006). Budget system reform in emerging economies: The challenges and the reform agenda. IMF Occasional Paper #245.Google Scholar
  15. Easterly W., Rebelo S. (1993) Fiscal policy and economic growth: An empirical investigation. Journal of Monetary Economics 32: 417–458CrossRefGoogle Scholar
  16. Easterly W., Irwin T., Serven L. (2008) Walking up the down escalator: Public investment and fiscal stability. World Bank Research Observer 23: 37–56CrossRefGoogle Scholar
  17. Esfahani H., Ramirez M. (2003) Institutions, infrastructure, and economic growth. Journal of Development Economics 70: 443–477CrossRefGoogle Scholar
  18. Flyvbjerg B., Bruzeliua N., Rothengatter W. (2003) Megaprojects and risk: An anatomy of ambition. Cambridge University Press, CambridgeGoogle Scholar
  19. Foster, V. B.-G., & Smits, K. (2008). Financing public infrastructure in Sub-Saharan Africa: Patterns and emerging issues. Working Paper, Africa Development Forum Series.Google Scholar
  20. Foster V., Cecilia B.-G. (2009) Africa’s Intrastructure: A time of transformation. World Bank, Washington, DCGoogle Scholar
  21. Guasch J., Laffont J., Straub S. (2007) Concessions of infrastructure in Latin America: Government-led renegotiation. Journal of Applied Econometrics 22: 1267–1294CrossRefGoogle Scholar
  22. Gupta, S., Kangur, A., Wane, A., & Papageorgiou, C. (2011). Efficiency-adjusted public capital and growth. IMF Working Paper WP11/217.Google Scholar
  23. Hall R., Jones C. (1999) Fundamental determinants of output per worker across countries. Quarterly Journal of Economics 114: 83–116CrossRefGoogle Scholar
  24. Haque, M., & Kneller, R. (2008). Public investment and growth: The role of corruption. Centre for Growth and Business Cycle Research Discussion Paper Series 98, Economics, The University of Manchester.Google Scholar
  25. Henisz W., Zelner B. (2006) Interest groups, veto points, and electricity infrastructure deployment. International Organization 60: 263–286CrossRefGoogle Scholar
  26. Hulten C. R. (1996) Infrastructure and economic development: One more unto the beach, mimeo. University of Maryland, College ParkGoogle Scholar
  27. Jacobs, D. (2008). A review of capital budgeting practices. IMF Working Paper WP/08/160, Washington, DC.Google Scholar
  28. Jones L., Tandon P., Vogelsang I. (1990) Selling public enterprises: A cost-benefit methodology. MIT, USAGoogle Scholar
  29. Keefer P., Knack S. (2007) Boondoggles, rent-seeking, and political checks and balances: Public investment under unaccountable governments. Review of Economics and Statistics 89: 566–572CrossRefGoogle Scholar
  30. Knack, S., Rogers, F. H., & Eubank, N. (2010). Aid quality and donor rankings. Policy Research Working Paper Series 5290, World Bank.Google Scholar
  31. Lowe, M. (2011). Converting cash into capital: What matters for public investment efficiency? mimeo. Oxford UniversityGoogle Scholar
  32. Petrie, M. (2010). Promoting public investment efficiency: A synthesis of country experiences. Paper presented for World Bank preparatory workshop, promoting public investment efficiency global lessons and resources for strengthening world bank support for client countries.Google Scholar
  33. Pritchett L. (2000) The tyranny of concepts: CUDIE (cumulated, depreciated, investment effort) is not capital. Journal of Economic Growth 5: 361–384CrossRefGoogle Scholar
  34. Rajaram, A., Le, T. M., Biletska, N., & Brumby, J. (2010). A diagnostic framework for assessing public investment management. World Bank Policy Research Working Paper 5397, Washington, DC.Google Scholar
  35. Serven, L. (2007). Fiscal rules, public investment, and growth. Policy Research Working Paper Series 4382, World Bank.Google Scholar
  36. Spackman, M. (2002). Multi-year perspective in budgeting and public investment planning.In Draft background paper for discussion at session III.1 of the OECD global forum on sustainable development: Conference on financing environmental dimension of sustainable development OECD, Paris, 24–26 April 2002, Paris.Google Scholar
  37. Squire L., van der Tak H.G. (1984) Economic analysis of projects. Johns Hopkins, USAGoogle Scholar
  38. Straub, S. (2008). Infrastructure and growth in developing countries: Recent advanced and research challenges. World Bank Policy Research Working Paper.Google Scholar
  39. World Bank. (2004). Zambia. Public expenditure management and financial accountability review, World Bank. USA.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  • Era Dabla-Norris
    • 1
  • Jim Brumby
    • 2
  • Annette Kyobe
    • 1
  • Zac Mills
    • 2
  • Chris Papageorgiou
    • 1
  1. 1.International Monetary FundWashingtonUSA
  2. 2.World BankWashingtonUSA

Personalised recommendations