Public Finance and Management

While the public sector is traditionally the sole provider for much of infrastructure, the pendulum is shifting in light of the enormous investment gap. Across the Global South, public utilities and planning agencies are engaging with the private sector to help bridge the gap. What are the key patterns of private participation in infrastructure (PPI) across countries in the Global South? What macro factors underscore such private participation? These research questions motivate this paper, focusing on five infrastructure sectors across the Global South and its regions. Following a historical synthesis of the changing balance of public and private provision, the paper outlines recent patterns of PPI. Drawing from a World Bank database, a regression analysis includes key macro-level predictors for private sector financing, for both the number of projects and stock of investment. Key results point to the importance of market size and in turn the potential for risk diversification, as well as a set of governance factors underlining investor confidence and stable environment.

Meeting climate change goals requires steadfast action at all levels of government in terms of both mitigation (measures to reduce greenhouse gas emissions) and adaptation (measures to reduce the impacts of climate change on economies and societies). Against this background, this paper discusses the role of subnational investment, including funding and financing options, as well as governance arrangements. It fills a gap in scholarly work on the principles guiding subnational investment in climate change mitigation and adaptation, identifies areas for future work, and underscores the need for cross-country comparable information on policy instruments and outcomes at the subnational levels of administration that could be used in more systematic hypothesis testing in this area.

JEL classification codes: H11, H70, Q54.

In the allocation of resources toward public infrastructure, spending on maintenance is typically neglected. Using a heterogeneous agent model, we find that reallocating funding away from new infrastructure investment and toward maintenance raises the effectiveness of existing public infrastructure and thus yields gains in GDP and in aggregate welfare. Richer households experience larger welfare gains than poorer households. A reallocation that takes funding away from maintenance is found to have adverse effects on GDP and aggregate welfare. Raising new funding with taxation yields larger positive benefits if this additional spending is divided between maintenance expenditures and investment in new infrastructure. Giving in to the “Tyranny of the Ribbon” by policymakers, that is, raising new funding to be spent only on new infrastructure, is shown to be the worse option.