Public Investment and Different Sources of Uncertainty

Mario Menegatti

No 2003-EP02, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: This work examines in a unified framework the effects on public investment decisions of different sources of uncertainty and the consequences of uncertainty variability over time. The analysis shows that uncertainty about investment benefits, future consumption and input costs have espectively negative, positive and ambiguous effects on the probability of implementation of the project. The effects of covariances are also examined. The work finally shows that uncertainty variability over time affects investment optimal timing and can imply the postposition of investment implementation even if the actual realisation increases the net present value of future utility.

Keywords: Public investment; uncertainty; cost-benefit analysis (search for similar items in EconPapers)
JEL-codes: D81 H43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:par:dipeco:2003-ep02

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