Bottlenecks in Ramping Up Public Investment

Frederick (Rick) van der Ploeg

No 66, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: A windfall in a developing economy with capital scarcity and investment adjustment costs facing a temporary windfall should be used to give more consumption to poorer present generations and to speed up development by ramping up public investment and paying off debt taking due account of the increasing inefficiency as investment gets ramped up. The optimal strategy requires negative genuine saving; the permanent income requires zero genuine saving. The optimal real consumption increments are smaller once one allows for absorption constraints resulting from Dutch disease and sluggish adjustment of ‘home-grown’ public capital.

Keywords: optimal management of windfalls; economic development; capital scarcity; public capital; PIMI; investment adjustment costs; absorption constraints; genuine saving; Dutch disease (search for similar items in EconPapers)
JEL-codes: E60 F34 F35 F43 H21 H63 O11 Q33 (search for similar items in EconPapers)
Date: 2011-10-13
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Bottlenecks in ramping up public investment (2012)
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