nep-reg New Economics Papers
on Regulation
Issue of 2021‒12‒06
twenty-two papers chosen by
Christopher Decker
Oxford University

  1. Airline Cooperation Effects on Airfare Distribution: An Auction-model-based Approach By Ivaldi, Marc; Petrova, Milena J; Urdanoz, Miguel
  2. Ex-post evaluation of the American Airlines-US Airways merger: a structural approach By Bontemps, Christian; Remmy, Kevin; Wei, Jiangyu
  3. Advanced Air Mobility: Demand Analysis and Market Potential of the Airport Shuttle and Air Taxi Markets By Goyal, Rohit; Reiche, Colleen; Fernando, Chris; Cohen, Adam
  4. Does Firm Exit Increase Prices? By Suveg, Melinda
  5. Measuring competition in services markets with pass-through and speed of adjustment By Frédéric Gonzales; Hildegunn Kyvik Nordås; Michel Lioussis
  6. Buyer’s Optimism, Information Design, and Price Discrimination By Pham, Hien
  7. Retail Pricing Format and Rigidity of Regular Prices By Ray, Sourav; Snir, Avichai; Levy, Daniel
  8. When ‘the’ market loses its relevance: an empirical analysis of demand-side linkages in platform ecosystems By CARBALLA SMICHOWSKI Bruno; DUCH BROWN Nestor; GOMEZ LOSADA Alvaro; MARTENS Bertin
  9. Economic impacts of mobile broadband innovation: Evidence from the transition to 4G By Jeffrey Eisenach; Robert Kulick
  10. Monopoly Capitalism in the Digital Era By Andrea Coveri; Claudio Cozza; Dario Guarascio
  11. Do search engines increase concentration in media markets? By Joan Calzada; Nestor Duch-Brown; Ricard Gil
  12. Can Media Pluralism Be Harmful to News Quality? By Federico Innocenti
  13. Can the UK achieve net-zero greenhouse gas emissions by 2050? By Jennifer L. Castle; David F. Hendry
  14. Electric Vehicles, Tax incentives and Emissions: Evidence from Norway By Florian Misch; Youssouf Camara; Bjart Holtsmark
  15. Plug-in behavior of electric vehicles users: Insights from a large-scale trial and impacts for grid integration studies By Felipe Gonzalez; Marc Petit; Yannick Perez
  16. Prescriptive selection of machine learning hyperparameters with applications in power markets: retailer's optimal trading By Corredera, Alberto; Ruiz Mora, Carlos
  17. Socio-Economic Measures for Achieving Total Water Cost Recovery: A Brief Analysis with Illustration from the Evrotas River Basin, Greece By Phoebe Koundouri; Stella Tsani; Nikitas Pittis; Eleftherios Levantis
  18. Assessing the Effectiveness of the WFD as a Tool to Address Different Levels of Water Scarcity Based on Two Case Studies of the Mediterranean Region By Stella Apostolaki; Ebun Akinsete; Stella Tsani; Phoebe Koundouri; Nikitas Pittis; Eleftherios Levantis
  19. Lessons from the History of the U.S. Regulatory Perimeter By Jess Cheng; Joseph Cox; Courtney Demartini; Katherine Di Lucido; Meg Donovan; Nick Ehlert; Byoung Hwa Hwang; Asad Kudiya; Dan McGonegle; Stacey L. Schreft; Gavin Smith; Nicholas K. Tabor; Alexandros Vardoulakis; Mary L. Watkins; Kathy Wilson; Jeffery Y. Zhang
  20. Democratic Political Economy of Financial Regulation By Igor Livshits; Youngmin Park
  21. Central bank digital currencies: motives, economic implications and the research frontier By Raphael Auer; Jon Frost; Leonardo Gambacorta; Cyril Monnet; Tara Rice; Hyun Song Shin
  22. Scaling Up Quality Infrastructure Investment By Laura Jaramillo; Olivier Bizimana; Mr. Saji Thomas

  1. By: Ivaldi, Marc; Petrova, Milena J; Urdanoz, Miguel
    Abstract: Airline alliances have a long history yet there is no academic consensus on how they affect price levels and their impact on price dispersion has not yet been studied. We address this question using a novel methodology motivated by the service homogenization and increased price competiton in this industry in the recent years. Establishing an equivalence between the online sales process and a reverse English auction, we use methods from auction econometrics to work in a new way with the standard industry data set: using individual ticket sales where only aggregated prices have been used in the past. Applicable to other industries where sellers compete in prices, this approach allows us to reconsider the effect of airline alliances on the distribution of airfares in the US domestic market. We find lower price mean and dispersion in markets where airlines belong to an alliance as a result of the lower variability of costs. The methodology we apply here can be used to study any distribution of individualized prices, which are now prevalent since the advent of the digital economy.
    Keywords: Airline,;cooperation; auction, price dispersion, price distribution.
    JEL: D22 D44 L11 L93
    Date: 2021–11
  2. By: Bontemps, Christian; Remmy, Kevin; Wei, Jiangyu
    Abstract: In this paper, we estimate a structural model of the domestic US airline market to analyze the effect of the recent merger between American Airlines and US Airways. Our results show that, between 2011 and 2016, a substantial fuel price drop in conjunction with changes in consumer preferences toward direct flights completely rationalizes the observed decrease in prices. However, we estimate that, during the same period, more than half of the consumer welfare increase is due, on top of these environmental changes, to the ex-post optimization of the networks of the newly merged airline and of its competitors.
    Keywords: Merger; airlines; network; structural model; nested logit; airfare; demand; supply.
    Date: 2021–11–09
  3. By: Goyal, Rohit; Reiche, Colleen; Fernando, Chris; Cohen, Adam
    Abstract: Advanced air mobility (AAM) is a broad concept enabling consumers access to on-demand air mobility, cargo and package delivery, healthcare applications, and emergency services through an integrated and connected multimodal transportation network. However, a number of challenges could impact AAM’s growth potential, such as autonomous flight, the availability of take-off and landing infrastructure (i.e., vertiports), integration into airspace and other modes of transportation, and competition with shared automated vehicles. This article discusses the results of a demand analysis examining the market potential of two potential AAM passenger markets—airport shuttles and air taxis. The airport shuttle market envisions AAM passenger service to, from, or between airports along fixed routes. The air taxi market envisions a more mature and scaled service that provides on-demand point-to-point passenger services throughout urban areas. Using a multi-method approach comprised of AAM travel demand modeling, Monte Carlo simulations, and constraint analysis, this study estimates that the air taxi and airport shuttle markets could capture a 0.5% mode share. The analysis concludes that AAM could replace non-discretionary trips greater than 45 min; however, demand for discretionary trips would be limited by consumer willingness to pay. This study concludes that AAM passenger services could have a daily demand of 82,000 passengers served by approximately 4000 four- to five-seat aircraft in the U.S., under the most conservative scenario, representing an annual market valuation of 2.5 billion USD.
    Keywords: Social and Behavioral Sciences
    Date: 2021–07–02
  4. By: Suveg, Melinda (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines how changes in product market concentration, specifically firm exit, affect prices. I develop a model where firms have variable markups to show that the remaining firms increase their markups and prices after their competitors’ exit. The model predictions are tested using micro-data on Swedish firms. I use the exposure of firms to a bank, which was severely affected by the financial crisis abroad, as an instrument to identify the causal relationship between firm exit and prices. I find that the remaining firms increase their prices by 0.3 percent when firms with a combined market share of one percent exit.
    Keywords: Price setting; Market structure; Financial shocks; Firm exit
    JEL: D43 E31 E32 L13 L16 L60
    Date: 2021–11–08
  5. By: Frédéric Gonzales; Hildegunn Kyvik Nordås; Michel Lioussis
    Abstract: Making trade work for all and harnessing popular support for openness to trade depends on consumers benefitting from lower prices and broader product variety. The present study reveals that those benefits depend on competition in services markets, in particular in telecommunication. These findings result from employing an industrial organisation framework to estimate the transmission of prices from the world market to consumers of certain services in local markets (distribution, transport, and financial services). The OECD Services Trade Restrictiveness Index (OECD STRI) is used to explore the relationship between the pass-through rate of input prices to consumer prices and policy measures that capture the openness and strength of competition in services markets. The OECD STRI in telecommunications is found to be associated with a more complete and faster pass-through of prices in all markets studied. The results also illustrate the crucial role played by the internet in allowing for price comparisons that generate competitive pressure on distributors.
    Keywords: Cointegration, Pass-through rates, Price signals, Services trade restrictions
    JEL: C1 D23 D41 L11
    Date: 2021–12–01
  6. By: Pham, Hien
    Abstract: A seller (she) faces a single buyer (he) who holds a biased and private prior belief regarding whether the product fits his need (which brings him a higher payoff than otherwise). The seller can provide additional information about the product that helps the buyer privately refine his belief. We fully characterize the revenue-maximizing menu of prices and disclosure policies that follows a simple cutoff structure. While the diversity in the priors alone is not sufficient to trigger price discrimi-nation, the presence of information design induces the optimal mech-anism featuring both information and price discrimination. Further-more, the seller does not strictly benefit from charging upfront pay-ments for information.
    Date: 2021–11
  7. By: Ray, Sourav; Snir, Avichai; Levy, Daniel
    Abstract: We study different notions of sale and regular prices, and their variability with store pricing-formats. We use data from three large stores with different pricing-formats (EDLP/Hi-Lo/Hybrid) that are located within 1-km radius. Importantly, the data contain both the actual transaction prices and the actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series and study their rigidity. Regular-price rigidity varies with store-formats because different format stores define regular-prices differently. Correspondingly, the meaning of price-cuts varies across store-formats. To interpret the findings, we consider the store pricing format distribution across the US.
    Keywords: Price Rigidity,Sticky Prices,Regular Prices,Sale Prices,Filtered Prices,Reference Prices,Transaction Prices,Price Cuts,Pricing Format,Every Day Low Price,EDLP,Hi-Lo,Hybrid
    JEL: E31
    Date: 2021
  8. By: CARBALLA SMICHOWSKI Bruno (European Commission – JRC); DUCH BROWN Nestor (European Commission – JRC); GOMEZ LOSADA Alvaro (European Commission – JRC); MARTENS Bertin (European Commission – JRC)
    Abstract: Recent literature has shown that the existence of supply and demand-side non-generic complementarities (“demand-side linkages") within ecosystems raises questions about the pertinence of defining a single relevant market comprising substitute products (“substitutability approach"). However, empirical methodologies to measure these linkages and asses the competitive dynamics underpinning them are lacking. Using recent data from internet traffic between the major 246 European digital platforms, we develop such a methodology and test some theoretical findings of the ecosystems literature with major implications for competition and regulatory analysis. We corroborate that demand-side linkages are a non-negligible phenomenon: 18% of these platforms show them. However, unlike what the ecosystems literature predicts, in roughly half of the cases they do not link complementors but platforms competing in at least one market. Finally, while, as expected, we observe demand-side linkages mostly within industry-defined ecosystems, we find evidence of industry-agnostic ecosystems. These could be instigated and orchestrated by platform users instead of by a firm. We conclude that the substitutability approach is not obsolete, but needs to be complemented with alternative approaches in order to i) take into account coopetition within the same relevant market and ii) analyze how the competitive process in one market can impact the welfare generated in another (industry's) market through non-generic complementarities.
    Keywords: ecosystems, platforms, complementarities, relevant market
    Date: 2021–11
  9. By: Jeffrey Eisenach (NERA Economic Consulting, Inc., George Mason University Law School, and the American Enterprise Institute); Robert Kulick (NERA Economic Consulting, Inc., George Mason University Law School)
    Abstract: This study reports estimates from a model of the economic effects of 4G mobile wireless technology adoption in the United States on employment and economic growth and, based on those results, projects the benefits of 5G adoption under different counterfactual scenarios.
    Keywords: 5G wireless, Economic growth, employment, technology and innovation
    JEL: A
    Date: 2020–05
  10. By: Andrea Coveri; Claudio Cozza; Dario Guarascio
    Abstract: The paper applies the radical view of Monopoly Capitalism to the digital platform economy. Based on the seminal ideas of Hymer and Zeitlin that led Cowling and Sugden to define the large monopolistic firm as a means to plan production from a unique centre of strategic decision-making, we attempt to develop a framework where digital platforms are conceived as an evolution of large transnational corporations. Power and control in our Monopoly Capitalism view are then meant not only in terms of market relations, but rather as levers for coordinating global production and influencing world societies. Applying this framework to the Amazon case, we highlight the key analytical dimensions to be considered: not only Amazon dominates other firms and suppliers through its diversification and a direct control of data and technology; its power is also linked to global labour fragmentation and uneven bargaining power vis-Ã -vis world governments, as in the Hymer and Cowling's tradition.
    Keywords: Monopoly Capital; Monopoly Power; Digital Platforms; Amazon; Multinational corporation
    JEL: L12 L22 P12
    Date: 2021–11
  11. By: Joan Calzada (Universitat de Barcelona); Nestor Duch-Brown (Joint Research Centre); Ricard Gil (Smith School of Business, Queen’s University)
    Abstract: Search engines are one of the main channels to access news content of traditional newspapers. In the European Union, organic search traffic from Google accounts for 35% of news outlets’ visits. Yet, the effects of Google Search on market competition and information diversity are ambiguous, as the firm indexes news outlets considering both domain authority and information accuracy. Using detailed daily data traffic for 606 news outlets from 15 European countries, we assess the effect of Google Search’s indexation on search visits. Our identification strategy exploits nine core algorithm updates rolled out by Google between 2018 and 2020 in order to achieve exogenous variation in news outlets’ indexation. Several conclusions follow from our estimations. First, Google core updates overall reduce the number of keywords that news outlets have in top positions in search results. Second, keywords ranked in top search position have a positive effect on news outlets’ visits. Third, our results are robust when we focus the analysis on different types of news outlets, but are less conclusive when we consider national markets separately. Our paper also analyzes the effects of Google core updates on media market concentration. We find that the three “big†core updates identified in this period reduced market concentration by 1%, but this effect was mostly compensated by the rest of the updates.
    Keywords: Media market, Google Search, Europe, core algorithm updates.
    JEL: L1 L5
    Date: 2021
  12. By: Federico Innocenti
    Abstract: I study the effect of polarization and competition on information provision. With a single expert who faces decision-makers with het- erogeneous priors, the expert solves a trade-off between persuading sceptics and retaining believers. With high polarization, an expert has incentives to supply low-quality information to leverage believers' credulity. With multiple experts with opposite biases, competition is harmful if attention is limited. Unbiased and Bayesian decision-makers rationally devote attention to like-minded experts. Echo chambers arise endogenously, whereas decision-makers would be better informed in monopoly. My model can rationalize the spread and persistence of conspiracy theories and fake news.
    Keywords: Bayesian Persuasion, Competition, Echo Chambers, Heterogeneous Priors, Limited Attention, Media Pluralism
    JEL: D82 D83 L82
    Date: 2021–05
  13. By: Jennifer L. Castle; David F. Hendry
    Abstract: Net-zero greenhouse gas (GHG) emissions are an excellent target, but difficult to achieve by having to bridge a dramatic energy transition from fossil fuels to renewables, as well as eliminate other sources of GHG emissions from agriculture, construction and waste. A comprehensive strategy for doing so is essential, and although components like renewable electricity generation and electric vehicles are well developed, many issues remain, especially timing the stages in tandem. The key sensitive intervention points (SIPs) are (a) installing sufficient non-GHG electricity, (b) having elec tric vehicles connected to the grid for large-scale short-run backup storage, (c) utilising intermittent ‘surplus’ energy for nearly free hydrogen production, (d) some liquified for medium-term storage and a high-heat for industry, and (e) other electricity-based uses such as in agriculture. Public support for a purely green economy will wane if the economic costs are too high, so it is essential to maintain employment and real per-capita incomes. Decarbonizing the economy while also dealing with the economic costs of the COVID-19 pandemic can occur by using an integrated stepped approach.
    Keywords: Greenhouse-Gas Emissions, Net-Zero Target, Decarbonizing, Economic Growth, Carbon Nanotubes, Renewable Electricity Generation
    Date: 2021–11–08
  14. By: Florian Misch; Youssouf Camara; Bjart Holtsmark
    Abstract: This paper empirically estimates the effects of electric vehicles (EVs) on passenger car emissions to inform the design of policies that encourage EV purchases in Norway. We use exceptionally rich data on the universe of cars and households from Norway, which has a very high share of EVs, thanks to generous tax incentives and other policies. Our estimates suggest that household-level emission savings from the purchase of additional EVs are limited, resulting in high implicit abatement costs of Norway’s tax incentives relative to emission savings. However, the estimated emission savings are much larger if EVs replace the dirtiest cars. Norway’s experience may also help inform similar policies in other countries as they ramp up their own national climate mitigation strategies.
    Keywords: emission savings; passenger car emission; savings from the purchase; car usage preference; purchased EVs; Tax incentives; Income; VAT exemptions; Greenhouse gas emissions
    Date: 2021–06–08
  15. By: Felipe Gonzalez (GeePs - Laboratoire Génie électrique et électronique de Paris - CentraleSupélec - SU - Sorbonne Université - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Marc Petit (GeePs - Laboratoire Génie électrique et électronique de Paris - CentraleSupélec - SU - Sorbonne Université - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Yannick Perez (LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay)
    Abstract: Electric vehicle (EV) grid integration presents significant challenges and opportunities for electricity system operation and planning. Proper assessment of the costs and benefits involved in EV integration hinges on correctly modeling and evaluating EV-user driving and charging patterns. Recent studies have evidenced that EV users do not plug in their vehicle every day (here called non-systematic plug-in behavior), which can alter the impacts of EV charging and the flexibility that EV fleets can provide to the system. This work set out to evaluate the effect of considering non-systematic plug-in behavior in EV grid integration studies. To do so, an open-access agent-based EV simulation model that includes a probabilistic plug-in decision module was developed and calibrated to match the charging behavior observed in the Electric Nation project, a large-scale smart charging trial. Analysis shows that users tend to plug-in their EV between 2 and 3 times per week, with a lower plug-in frequency for large-battery EVs and large heterogeneity in user charging preferences. Results computed using our model show that non-systematic plug-in behavior effects reduce the impact of EV charging, especially for price-responsive charging, as fewer EVs charge simultaneously. On the other hand, non-systematic plug-in can reduce available flexibility, particularly when considering current trends towards larger battery sizes. Counter-intuitively, large-battery fleets can have reduced flexibility compared to small-battery fleets, both in power and stored energy, due to lower plug-in frequency and higher energy requirements per charging session. Improving plug-in ratios of EV users appears as key enabler for flexibility. In comparison, augmenting charging power can increase the flexibility provided by EV fleets but at the expense of larger impacts on distribution grids.
    Date: 2021–11
  16. By: Corredera, Alberto; Ruiz Mora, Carlos
    Abstract: We present a data-driven framework for optimal scenario selection in stochastic optimization with applications in power markets. The proposed methodology relies in the existence of auxiliary information and the use of machine learning techniques to narrow the set of possible realizations (scenarios) of the variables of interest. In particular, we implement a novel validation algorithm that allows optimizing each machine learning hyperparameter to further improve the prescriptive power of the resulting set of scenarios. Supervised machine learning techniques are examined, including kNN and decision trees, and the validation process is adapted to work with time-dependent datasets. Moreover, we extend the proposed methodology to work with unsupervised techniques with promising results. We test the proposed methodology in a realistic power market application: optimal trading strategy in forward and spot markets for an electricity retailer under uncertain spot prices. Results indicate that the retailer can greatly benefit from the proposed data-driven methodology and improve its market performance. Moreover, we perform an extensive set of numerical simulations to analyze under which conditions the best machine learning hyperparameters, in terms of prescriptive performance, differ from those that provide the best predictive accuracy.
    Keywords: Or in energy; Data-Driven; Electricity Retailer; Hyperparameter Selection; Machine Learning
    Date: 2021–11–25
  17. By: Phoebe Koundouri; Stella Tsani (Athens University of Economics and Business); Nikitas Pittis (University of Piraeus, Greece); Eleftherios Levantis
    Abstract: The EU Water Framework Directive is considered a first systematic approach to ensure the quality of freshwater ecosystems holistically. At the core of the Directive is the concept of 'Total' costs and benefits of water use, i.e. the financial, environmental and resource costs of water use. Many studies stress the importance of conceptualizing and monetizing the total water costs. Nevertheless, implementing total water cost recovery may raise social and redistributive concerns. We discuss the approaches to implement total water cost recovery with illustrations from the Evtoras River Basin in Greece. We argue that the measures might not work towards achieving total water cost recovery. We thus complement the analysis with a brief discussion of the socio-economic tools and instruments that policy makers may additionaly consider. We conclude with some policy recommendations and insights in support of well-informed policy making.
    Keywords: Total water cost recovery, Programme of measures, Water framework directive, Sustainable management
    Date: 2019–12
  18. By: Stella Apostolaki; Ebun Akinsete (ICRE8); Stella Tsani (Athens University of Economics and Business); Phoebe Koundouri; Nikitas Pittis (University of Piraeus, Greece); Eleftherios Levantis
    Abstract: Despite being a natural phenomenon, water scarcity is, to a great extent, human-induced, particularly affected by climate change and by the increased water resources vulnerability. The Water Framework Directive (WFD), an 'umbrella' directive that aims to provide holistic approaches to the management of water resources and is supported by a number of Communication documents on water scarcity, requires for prompt responses to ensure 'healthy' water bodies of good ecological status. The current paper presents a multidisciplinary approach, developed and engaged within the Globaqua Project, to provide an assessment of the main challenges towards addressing water scarcity with emphasis on the climate change projections, in two Mediterranean regions. The current paper attempts to critically assess the effectiveness of the WFD as a tool to address water scarcity and increase sustainability in resource use. Criticism lies on the fact that the WFD does not directly refer to it, still, water scarcity is recognized as a factor that increases stress on water resources and deteriorates their status. In addition, the Program of Measures (PoMs) within the WFD clearly contribute to reducing vulnerability of water resources and to ensure current and future water use, also under the impact of the projected climate change.
    Keywords: water scarcity, sustainable resource management, integrated water management, Program of Measures, climate change, multidisciplinary approach
    Date: 2019–12
  19. By: Jess Cheng; Joseph Cox; Courtney Demartini; Katherine Di Lucido; Meg Donovan; Nick Ehlert; Byoung Hwa Hwang; Asad Kudiya; Dan McGonegle; Stacey L. Schreft; Gavin Smith; Nicholas K. Tabor; Alexandros Vardoulakis; Mary L. Watkins; Kathy Wilson; Jeffery Y. Zhang
    Abstract: Banking organizations in the United States have long been subject to two broad categories of regulatory standards. The first is permissive: a "positive" grant of rights and privileges, typically via a charter for a corporate entity, to engage in the business of banking.
    Date: 2021–10–15
  20. By: Igor Livshits; Youngmin Park
    Abstract: This paper offers a simple theory of inefficiently lax financial regulation arising as an outcome of a democratic political process. Lax financial regulation encourages some banks to issue risky residential mortgages. In the event of an adverse aggregate housing shock, these banks fail. When banks do not fully internalize the losses from such failure (due to limited liability), they offer mortgages at less than actuarially fair interest rates. This opens the door to home ownership for young, low net-worth individuals. In turn, the additional demand from these new home-buyers drives up house prices. This leads to a non-trivial distribution of gains and losses from lax regulation among households. On the one hand, renters and individuals with large non-housing wealth suffer from the fragility of the banking system. On the other hand, some young, low net-worth households are able to get a mortgage and buy a house, and current (old) home-owners benefit from the increase in the price of their houses. When these latter two groups, who benefit from the lax regulation, constitute a majority of the voting population, then regulatory failure can be an outcome of the democratic political process.
    Keywords: Financial stability; Financial system regulation and policies; Housing; Interest rates
    JEL: E44 E63 G12
    Date: 2021–11
  21. By: Raphael Auer; Jon Frost; Leonardo Gambacorta; Cyril Monnet; Tara Rice; Hyun Song Shin
    Abstract: In just a few years, central banks have rapidly ramped up their research and development effort on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the "reserves for all" aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity and privacy. This paper gives a guided tour of the growing literature on CBDCs on the microeconomic considerations related to operational architectures, technologies and privacy, and the macroeconomic implications for the financial system, financial stability and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved, and calls for further work to expand the research frontier.
    JEL: C72 C73 D4 E42 E58 G21 O32 L86
    Date: 2021–11
  22. By: Laura Jaramillo; Olivier Bizimana; Mr. Saji Thomas
    Abstract: South Asia needs large infrastructure investments to achieve its development goals, and public investment can also support the Covid-19 recovery. Regression estimates that account for the quantity and quality of investment suggest that public infrastructure was a key driver of productivity growth in South Asia. Going forward, higher public infrastructure spending can raise growth, but its benefits depend on how it is financed and managed. Model simulations show that tax financing, concessional lending, or private sector financing through public private partnerships (PPPs) are more advantageous than government borrowing through financial markets because they support growth while containing the impact on public debt. However, the optimal choice also depends on available fiscal space, taxation capacity, implementation risks, and public investment efficiency. To reap the most benefits from higher infrastructure investment, South Asian countries need to manage fiscal risks carefully, including from PPPs and state-owned enterprises, and improve public investment efficiency.
    Keywords: infrastructure investment; tax financing; quality of investment; PPP financing; efficiency gap; multiyear investment planning; Public investment spending; Infrastructure; Capital budget; South Asia; Asia and Pacific; Caribbean
    Date: 2021–04–30

This nep-reg issue is ©2021 by Christopher Decker. 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.