nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2018‒12‒24
three papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Large scale urban projects: the state and gentrification in the belo horizonte metropolitan region By Roberto Luís de Melo Monte-Mór; Renan Pereira Almeida; Marcelo de Brito Brandão
  2. Foresight as a governance tool to help shape the next production revolution By Havas, Attila; Weber, Matthias
  3. The Benchmark Inclusion Subsidy By Kashyap, Anil K; Kovrijnykh, Natalia; Li, Jian; Pavlova, Anna

  1. By: Roberto Luís de Melo Monte-Mór (Cedeplar-UFMG); Renan Pereira Almeida (Cedeplar-UFMG); Marcelo de Brito Brandão (Cedeplar-UFMG)
    Abstract: This paper assesses the degree to which a series of large-scale urban projects along the North Axis of the Metropolitan Region of Belo Horizonte (MRBH), Brazil, may have triggered a process of gentrification since 2004. The North Axis is the poorest zone of the MRBH and it has been the subject of multiple development and investments plans, under the concept of “Aerotropolis” – the globalized metropolis that has an international airport as the anchor for its development. Although initially proposed as a Public-Private Partnerships (PPPs), state government had the central role in these projects and funded almost all. These investments include a series of large-scale urban projects, including the Green Line (Linha Verde) corridor, which connects the central city to the International Airport Tancredo Neves, and the relocation of the administrative offices of the state government (Cidade Administrativa de Minas Gerais, CAMG). All these plans and developments were sustained by major investments in road and service infrastructure, including a Bus Rapid Transit (BRT) system. Area plans and investments have likely increased land values and rents in the area, sparking concern about the gentrification of low-income households in and around the area. Responding to an academic and policy need to assess how and to what degree large-scale urban projects trigger processes of gentrification, the paper exposes a quasi-experimental, mixed-methods research to identify whether and why land values have increased, and if a relationship can be established between those increases and the displacement of low-income households who had made the area their home. This research used a number of datasets to grasp the empirical evidences as well as case studies (fieldwork to generate a robust explanation of the forces and relationships behind and dynamics of the area’s potential gentrification). Empirical results indicate that the large-scale urban projects such as the CAMG may have increased the land values in the study area at nearly 17%. On the other hand, the “MOVE” BRT system may have caused a 14% price drop in the study area. Regarding the potential gentrification process, empirical results rejected this hypothesis, mainly because the study area is a consolidated area and the high-income groups have not being attracted to the area. The study generated the conditions to design and implement another study, focused more specifically on land value increments indeed generated by area plans and investments, covering a wider area and the range of options local governments could consider recovering those increments. Moreover, more research is necessary to clarify the effects of BRT systems on Latin American cities, a key concern on urban policy nowadays.
    Keywords: infrastructure, land markets, spatial segregation, economic development.
    JEL: R12 R2 E R3
    Date: 2018–12
  2. By: Havas, Attila; Weber, Matthias
    Abstract: The next production revolution (NPR; also called Industry 4.0 elsewhere) is likely to trigger complex changes via the interactions of new technologies, materials, processes, and business models. These changes would affect R&D and innovation activities; the labour market; income distribution and well-being; skill requirements; as well as several fields of regulation. Furthermore, digitalisation can be a major enabler of the circular economy. The policy implications of the NPR are so wide-ranging that it is difficult to mention a major policy domain, which would remain untouched by these sweeping changes. The need for policy orchestration is, therefore, rather strong. Foresight, a specific type of forward-looking activities (FLA), can assist policy-makers in dealing with these complex changes. First, it facilitates a systemic approach, considers multiple futures and draws on the diverse set of knowledge of participants. Second, a shared vision, developed – and thus ‘owned’ – by the participants, can reduce the uncertainties generated by NPR, and it helps building commitment among participants as an additional factor to keep up the momentum of orchestrated policy design and implementation. Third, a transformative foresight process, considering and assisting systemic changes triggered by NPR, can contribute to reshaping the prevailing power structures and invigorating policy rationales, decision-making processes, and thus improving the efficacy of policies. FLA projects dealing with NPR issues vary in their thematic coverage and their breadth of participation. Combining these distinctions, four different archetypes of FLA are identified – and illustrated by actual cases – in the paper. The expected impacts on policy-making vary by the type of prospective analyses. Participatory processes mobilise a wider set of knowledge, aspirations, and worldviews compared to an expert-based project. Hence, more novel ideas can be expected, contested from various angles, hence tested more thoroughly, given the diversity of participants. FLA projects focusing on innovation and manufacturing systems consider a broader set of issues than S&T-centred projects. Given the complex issues brought about by the NPR, such a systemic approach seems to be more appropriate as a foundation for devising effective policies. In certain contexts, S&T-centred FLA can also be useful, but different and only more limited benefits and impacts can arise from this approach. Foresight benefits are far from being automatic: the paper considers eight critical factors to achieve those. An astute embedding of foresight into policy-making enhances the likelihood of impact, but foresight recommendations are no substitute for policy decisions and actions.
    Keywords: The next production revolution; Typology of FLA; Expected impacts of FLA; Foresight benefits
    JEL: O25 O30 O33 O38
    Date: 2018–11–15
  3. By: Kashyap, Anil K; Kovrijnykh, Natalia; Li, Jian; Pavlova, Anna
    Abstract: We study the impact of evaluating the performance of asset managers relative to a benchmark portfolio on firms' investment, merger and IPO decisions. We introduce asset managers into an otherwise standard asset pricing model and show that firms that are part of the benchmark are effectively subsidized by the asset managers. This "benchmark inclusion subsidy" arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. Contrary to what is usually taught in corporate finance, we show that the value of an investment project is not governed solely by its own cash-flow risk. Instead, because of the benchmark inclusion subsidy, a firm inside the benchmark would accept some projects that an identical one outside the benchmark would decline. The two types of firms' incentives to undertake mergers or spinoffs also differ and the presence of the subsidy can alter a decision to take a firm public. We show that the higher the cash-flow risk of an investment, the larger the benchmark inclusion subsidy; the subsidy is zero for safe projects. Benchmarking also leads fundamental firm-level cash-flow correlations to rise. We review a host of empirical evidence that is consistent with the implications of the model.
    Keywords: asset management; Benchmark; Index; investment; mergers; Project Valuation
    JEL: G11 G12 G23 G32 G34
    Date: 2018–12

This nep-ppm issue is ©2018 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.