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041 _aENG
100 _aAtolia, Manoj
245 _aInvesting in Public Infrastructure
_bRoads or Schools?
260 _aWashington
_bInternational Monetary Fund
300 _a44p.
440 _aIMF Working Paper Series
520 _aWhy do governments in developing economies invest in roads and not enough in schools? In the presence of distortionary taxation and debt aversion, the different pace at which roads and schools contribute to economic growth turns out to be central to this decision. Specifically, while costs are front-loaded for both types of investment, the growth benefits of schools accrue with a delay. To put things in perspective, with a “big push,” even assuming a large (15 percent) return differential in favor of schools, the government would still limit the fraction of the investment scale-up going to schools to about a half. Besides debt aversion, political myopia also turns out to be a crucial determinant of public investment composition. A “big push,” by accelerating growth outcomes, mitigates myopia—but at the expense of greater risks to fiscal and debt sustainability. Tied concessional financing and grants can potentially mitigate the adverse effects of both debt aversion and political myopia.
650 _aEducation
650 _a Public investment
650 _aDebt sustainability
650 _aHuman capital
650 _aPolitical myopia
650 _aDebt aversion
650 _aLow income developing countries
650 _aDeveloping countries
650 _aIMF
700 _aLi, Bin Grace
700 _aMarto, Ricardo
700 _aMelina, Giovanni
710 _aIMF
942 _2udc
999 _c81433
952 _40
_oElectronic media