Can Public Investment Have a Positive Rate of Return

Bibliographic Data

ID10181978
AuthorsDebra L Shapiro (0000-0001-9523-2848, corresponding author), David L Shapiro
Year1973
Volume81
Issue2, Part 1
Pages401-413
Publication date1973-03-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/260035
OpenAlexW2084027667
LanguageEN
Citations received5
References cited4

The model presented assumes that public managers select investment projects hat maximize the net private benefits of their constituent pressure groups. This achieves increased agency size, which is more likely to increase managerial compensation than to maximize net social benefits, the assumed goal of the conventional public investment model. To increase agency size, managers must often resort to projects with low or negative return rates. The selection of such projects is possible because transactions costs are sufficiently large to bar successful opposition by disaffected taxpayers. The analysis as well as empirical evidence suggests that inefficient public projects are the rule rather than the exception

Actuarial science · Agency (philosophy · Agency cost · Business · Economics · Internal rate of return · Investment (military · Microeconomics · Opposition (politics · Public economics · Quality (philosophy · Rate of return · Return on investment · Social benefits · Finance · Fiscal Policy and Economic Growth · Housing Market and Economics · Local Government Finance and Decentralization

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