Highways cost and regulation in Europe “Economic Impact of Highway Investment and its Financing”
« Marginal » Investment 2/22/2019
« Structural » Investment 2/22/2019
Typology of equilibria Competive Equilibrium (Walras, Pareto): prices clear all markets short and long-term Short-term Equilibria with quantity rationing (Keynes) Long-term equilibria (Smith, Ricardo, Marx) Structuralist and other approaches leaving a role for effective demand 2/22/2019
Rationing approach You can have several regimes, depending on the number of markets (typically 4, of which keynesian unemployment, classical unemployment and repressed inflation) In each regime a different side of the market is rationed Rationing in one market implies rationing in at least another market (=> quantity spillovers => macroeconomic multiplier) Welfare analysis show that multipliers enter into shadow prices out of equilibrium, for instance 0.85 for wages 2/22/2019
Provisional Conclusion In equilibrium: only look at consumption effects valued at market prices Out of equilibrium: take macroeconomic effects into account through the multiplier, i.e. take into account quantity spillover effects 2/22/2019
What about TEN-T roads ? 2/22/2019
Anything on multipliers ? 2/22/2019
Financing aspects: Case 1 2/22/2019
Financing Aspects: Case 2 2/22/2019
Effects on the Government budget Investment cost impacts 100% on both deficit and debt for the year if asset belongs to public sector If asset belongs to private sector only the services provided during the year impact on both the deficit and the debt With net worth accounting no impact of financing mode: effect should be equal to present value of the stream of cash flows belonging to each sector Issue is between private and public debt. Choice should depend on desired public road stock 2/22/2019
Net value of EU road stock? 2/22/2019
Conclusions TEN-T has macroeconomic relevance Out of equilibrium its macroeconomic multiplier effects should also be taken into account These are likely to be high because effect similar to a coordinated fiscal policy shock If the purpose of TEN-T is macroeconomic, better be careful with PPPs and related, especially in NMS Public sector financing should be admissible Otherwise other forms of active macroeconomic coordination should be sought 2/22/2019