Design of investment promotion policies

Anastasia Kartasheva

International Journal of Industrial Organization, 2012, vol. 30, issue 2, 127-136

Abstract: Over the last 20years, developing countries have experienced the massive shift of financing and the operation of infrastructure from the public to the private sector. The paper analyzes how the government agency should structure the investment promotion policy. I develop a sequential contracting model between the government, investors and infrastructure providers and derive several properties of the optimal policy. The policy leaves investors uncertain about the project type and prescribes different levels of government support, in the form of tax or price distortions. However, the optimal policy does not change the expectations of investors about distribution of project returns. I characterize how the optimal policy depends on the revenue generation preferences of the government and the profitability of infrastructure projects in the country.

Keywords: Infrastructure financing; Sequential mechanisms; Investment promotion; Information disclosure (search for similar items in EconPapers)
JEL-codes: D82 D86 G38 L51 O2 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:30:y:2012:i:2:p:127-136

DOI: 10.1016/j.ijindorg.2011.04.005

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