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Public Investment: Growth and Quality Measurement



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Public Investment Growth and Quality Measurement By Vinicius Pinto de Menezes Advisor Prof William Handorf Washington DC December 2007 1 INTRODUCTION 3 1 PUBLIC SPENDING 5 1 1 Scarcity of resources 5 1 2 Externality 7 1 3 Information 7 1 4 Paternalism 8 1 5 Market power 8 1 6 Infrastructure 9 2 PUBLIC INVESTMENT AND GROWTH 11 2 1 Rate of growth 11 2 2 Productivity 12 3 FISCAL POLICY 14 3 1 Endogenous growth models 14 3 2 Growth effects of taxes and expenditures in a Barro model 15 3 3 Budget deficits and growth 16 4 PUBLIC EXPENDITURE MEASURING 17 4 1 Investment evaluation 17 4 2 Methods 22 CONCLUSION 24 REFERENCE 27 2 INTRODUCTION In the Century 20th public investment sector was one of the most important factors in the economic growth all in many countries all over the globe At that time the governments role was fundamental once it was the only one capable of raise a considerable amount of funds to spend in productive area In the other hand economic growth means demand for social services and expenditures Decades later increasing needs in investment infrastructure a public services allied to constrains budgets led countries an upward fiscal deficits causing poor results in social development and economic growth So the size and the role of state were put in discussion The conclusion was that to be more effective public sector should be smaller The Minimal State providing only the essentials services and leaving economy take care of itself The State should change directions from enterpriser to regulator in order to recovery capacity in make investments in infrastructure an provide services with quality In this context reforms have been made inspired by the belief of the efficacy of market solutions looking forward not only withdraw the public sector from areas where private sector could operat e better but also searching ways in which market could improve performance in areas that would remain in the public sector Nevertheless these reforms have shown various results



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