Infrastructure Compression and Public Sector Solvency in Latin America
Cesar Calderon (),
William Easterly and
Luis Servén
Working Papers Central Bank of Chile from Central Bank of Chile
Abstract:
Public investment and infrastructure spending are often singled out for drastic cuts at times of fiscal retrenchment. Fiscal austerity in Latin America during the 1980s and 1990s was characterized by a sharp contraction in infrastructure spending. In 5 of the 9 major Latin American countries, infrastructure investment cuts contributed half or more of the total fiscal adjustment. However, the compression of infrastructure spending does not guarantee the sustainability of the public sector. Infrastructure spending cuts not only reduce the public deficit (thereby raising the public sector’s net worth) but also leads to a decline in infrastructure stock accumulation and in output growth as well. This in turn implies a reduction in the economy’s debt-servicing capacity, thus weakening the public sector net worth (Easterly, 2001). In the present paper we quantitatively assess the growth cost of public infrastructure compression for major Latin American economies during the fiscal austerity period of the 1980s and 1990s, and examine the effectiveness of infrastructure spending cuts as a device to enhance public sector solvency.
Date: 2002-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
https://www.bcentral.cl/documents/33528/133326/DTBC_187.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:187
Access Statistics for this paper
More papers in Working Papers Central Bank of Chile from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Alvaro Castillo ().