nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2018‒02‒19
five papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Financing innovative green projects with asymmetric information and costly public funds By Meunier Guy; Ponssard Jean-Pierre
  2. Estimating the benefits of R&D subsidies for Germany By Koehler, Mila
  3. Evaluation of Individual and Group Lending under Asymmetric information By Peter Simmons; Nongnuch Tantisantiwong
  4. Indonesian South-South Cooperation: Stepping Up the Institution and Strategy for Indonesias Development Assistance By Aditya Alta; Rhapsagita Malist Pamasiwi
  5. How to improve Norway’s Transport-Infrastructure Investment By Philip Hemmings; Jagoda Egeland; Juan Garin

  1. By: Meunier Guy (INRA; ALISS; Ecole Polytechnique); Ponssard Jean-Pierre (Ecole Polytechnique)
    Abstract: The energy transition requires the deployment of significant programs in research and development. In absence of a long term commitment by governments on an international price of carbon various forms of national subsidies have been used. This paper analyzes the potential benefit of using subsidies conditional on success or failure of an R&D program, rather than a flat subsidy. The relationship between the state and the firm is formalized in the principal agent framework. Three potential sources of inefficiency are identified: conditions of observability of the outcome of the project, adverse selection regarding the probability of success and moral hazard. We shall show how subsidies that reward failure and subsidies that reward success mitigate these respective sources of inefficiency in a superior way as compared to flat subsidies. The gap between our second best policies and the first best is also identified. We bring together our analytical results and offer some guidance for the design of contractual investment programs such as the contractual instruments used in the Investment Program for the Future (Programme d’Investissements d’Avenir) launched in France in 2010 to promote R&D for the energy transition over the period 2010-2020.
    Keywords: green innovation, financing, public support, asymmetric information
    Date: 2017–10–01
  2. By: Koehler, Mila
    Abstract: In Germany, R&D subsidies are an important tool to support innovation in the private sector. This paper studies the welfare effects of R&D subsidies distributed through the German federal government's thematic R&D programs between 1994 and 2011. The analysis is based on a structural model of the R&D subsidy process which allows to estimate the benefits of R&D subsides to the German economy. The model takes into account heterogeneous application costs of firms and identifies the effect of the subsidy on the federal government's utility as well as on firm profits. Assuming a welfare-maximizing federal government, the estimated average social rate of return is 34% for Germany in the period 1994 to 2011. Thereby effects on firm profits are similar to effects on spillovers to the rest of the German economy. Besides results show that the subsidy rate decision in Germany remained remarkably stable over time, and that application costs as well as the marginal profitability of subsidized R&D projects are lower after the year 2000 compared to the years before.
    Keywords: R&D,Innovation,R&D Subsidies,Innovation Policy,Welfare Economics
    JEL: D61 H25 L59 O31 O38
    Date: 2018
  3. By: Peter Simmons; Nongnuch Tantisantiwong
    Abstract: The paper attempts to find the socially best loan contract by comparing exante welfare, interest and default rates of individual and group lending. We introduce a general framework which allows auditing policies and interest rates to be simultaneously determined by maximising the social welfare. Both variables vary with the types of risk considered: independently identically distributed and positively correlated risk. An individual project outcome is private information of its owner, but reported outcomes can be audited at a cost which then publicly reveals the true project outcome. We find that incentive compatibility in a group loan context is delicate: the conditions for truth telling vary with the borrowers’ perception of the overall solvency of the group. In addition, group loans are often made to local groups who have established local networks. This may mean that the group has cheaper policing of truthtelling, but also that the risks on projects within the group are likely to be correlated. To explore this, we numerically solve for the optimal contracts with varying audit cost differences and correlation, using a betabinomial distribution. We find that with an audit cost advantage, small group loans (typically to two borrowers) dominate individual loans even with correlation. But if audit costs are identical, the individual loan dominates. In the larger the group, the higher the audit probability is required to ensure truthtelling. Our finding provides an argument for why the number of borrowers should be limited to 2-5.
    Keywords: Group lending, Heterogeneous and Correlated risk, Welfare, Loan Auditing
    JEL: D81 G21
    Date: 2018–02
  4. By: Aditya Alta (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Rhapsagita Malist Pamasiwi (USIP)
    Abstract: This paper reviews Indonesia’s South-South Cooperation (SSC) efforts with an aim of providing policy recommendations to improve Indonesia’s management and implementation of its development assistance. The National Coordination Team on South-South Cooperation (NCT-SSC)—the current national institution mandated with SSC in Indonesia—is suffering from fundamental constraints in terms of coordination, organization, and institutionalization. Furthermore, the efforts to further the institutionalization by establishing a single agency for SSC have been progressing very slowly due to a lack of firm legal basis on one hand, and a proclivity for practical, business-as-usual approach on the other. To improve the institution and programming of Indonesian development assistance, a number of recommendations are suggested. First, a strong legal basis through the issuance of a Presidential Regulation on SSC management should be pushed to serve as a precursor to the single agency. Second, better public communication and outreach should be conducted to promote the SSC programs. Adequate monitoring and evaluation system should also be developed to measure program impacts. Moreover, Indonesia needs to have a strategy to promote the participation of business sector in SSC, such as by promoting firms’ participation as contractor or a source of fund for projects in beneficiary countries. Finally, expertise in specific fields, such as agriculture and tsunami and earthquake risk management, should be promoted as a niche branding of Indonesia’s assistance.
    Keywords: South-South Cooperation — Development Cooperation — Development Assistance
    JEL: F50 H11 O19
    Date: 2018–01
  5. By: Philip Hemmings; Jagoda Egeland; Juan Garin
    Abstract: Norway makes substantial public investment in transport and this has intensified in recent years. There is potentially large economic benefit from such investment, particularly as good transport infrastructure can help Norway’s transition away from oil-related activities. However, realising these gains requires sound processes for selecting and delivering projects. This paper assesses the investment process from initial proposals through evaluation, discussion, selection, approval, implementation, and ex post evaluation. It finds that, although the policy process at each stage is clear, and the planning framework has central oversight, final choices of project are often sub-optimal. The paper identifies a need for stronger top-down influence in the planning process and more influence of economic-efficiency considerations in project selection. It also calls for efforts to broaden ex post assessment of transport investment projects and reduction in project delays.
    Keywords: cost-benefit analysis, ex-post assessment, project selection, transport investment
    JEL: R42
    Date: 2018–02–19

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