nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2009‒11‒21
five papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Cost and Time Overruns in Infrastructure Projects: Extent, Causes and Remedies By Ram Singh
  2. User, and Open Collaborative Innovation: Ascendent Economic Models By Carliss Y. Baldwin; Eric von Hippel
  3. Credit allocation, capital requirements and procyclicality By Jokivuolle, Esa; Kiema, Ilkka; Vesala, Timo
  4. Time to Build Capital: Revisiting Investment-Cash Flow Sensitivities By Tsoukalas, John
  5. The Chinese Aid System By Carol Lancaster

  1. By: Ram Singh
    Abstract: Various issues related to delays and cost overruns in publically funded infrastructure projects are investigated. The study is based on, by far, the largest data-set of 850 projects across seventeen infrastructure sectors. The focus is on the causal factors behind time and cost overruns. [CDE WP No. 181].
    Keywords: time, sectors, India, economic, political, public goods, privatization, supply, servicesDelays, Cost Overruns, Time Overruns, Infrastructure, Projects, Causes, Contractual Failures, Organizational Failures, Institutional Failures
    Date: 2009
  2. By: Carliss Y. Baldwin (Harvard Business School, Finance Unit); Eric von Hippel (Massachusetts Institute of Technology)
    Abstract: In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with - and may displace -producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.
    Date: 2009–11
  3. By: Jokivuolle, Esa (Bank of Finland Research); Kiema, Ilkka (University of Helsinki); Vesala, Timo (Tapiola Group)
    Abstract: Although beneficial allocational effects have been a central motivator for the Basel II capital adequacy reform, the interaction of these effects with Basel II’s procyclical impact has been less discussed. In this paper, we investigate the effect of capital requirements on the allocation of credit and its interaction with procyclicality, and compare Basel I and Basel II type capital requirements. We consider competitive credit markets where entrepreneurs of varying ability can apply for loans for one-period investment projects of two different risk types. The risk of a project further depends on the state of the economy, modelled as a two-state Markov process. In this type of setting, excessive risk taking typically arises because higher-type borrowers cross-subsidize lower-type borrowers via a pricing regime based on average success rates. We find that risk-based capital requirements (such as Basel II) alleviate the cross-subsidization effect and can be chosen so as to implement first-best allocation. This implies that the ensuing reduction in the proportion of high-risk investments may mitigate the procyclical effect of Basel II on economic activity. Moreover, we find that optimal risk-based capital requirements should be set lower in recessions than in normal times. Our simulations show that when measured by either cumulative output or output variation, Basel II type capital requirements may actual be slightly less procyclical than flat capital requirements. The biggest reduction in procyclicality is however achieved with optimal risk-based capital requirements which are considerably higher than Basel II requirements and which are adjusted downwards in recession periods.
    Keywords: Basel II; bank regulation; capital requirements; credit risk; procyclicality
    JEL: D41 D82 G14 G21
    Date: 2009–09–22
  4. By: Tsoukalas, John
    Abstract: A large body of empirical work has established the signi¯cance of cash flow in explain- ing investment dynamics. This finding is further taken as evidence of capital market imperfections. We show, using a perfect capital markets model, that time-to-build for capital projects creates an investment cash flow sensitivity as found in empiri- cal studies that may not be indicative of capital market frictions. The result is due to mis-specification present in empirical investment-q equations under time-to-build investment. In addition, time aggregation error can give rise to cash flow effects inde- pendently of the time-to-build effect. Importantly, both errors arise independently of potential measurement error in q. We provide implications and recommendations for empirical work.
    Keywords: Investment; Capital market imperfections; Time-to-build
    JEL: E32 G31 E22
    Date: 2009
  5. By: Carol Lancaster
    Abstract: Questions about Chinese aid—how large it is and how fast it is growing; how decisions are made on how much aid is provided each year; which countries receive it and how much they get; how the aid is managed within the Chinese government and how it is evaluated are explored. The Chinese are clearly set to play a major role in aid-giving worldwide, and the aid-giving governments of Europe, North American and Japan should expand lines of communication and, to the extent possible, collaboration with the Chinese. [CGD Essay].
    Keywords: africa, Asia, Chinese, government, europe, north american, japan, poor countries, china, Health, American aid, africa, Education
    Date: 2009

This nep-ppm issue is ©2009 by Arvi Kuura. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.