@techreport{Gerlagh2011Public,
abstract = {Should public assets such as infrastructure, education, and the environment earn the same return as private investments? The long-term nature of public investments provides commitment to current preferences, which justifies lower than private returns for time-inconsistent decision markers. An institutionalized (i.e., exogenous) rule demanding equalized comparable returns removes the bias and implements the standard cost-benefit requirement. We show that such a stand-alone rule has no general welfare content: it implements Pareto efficiency if and only if preferences are time-consistent. Efficiency requires rules not only for the composition of investments but also for overall savings. Without supplementary rules for savings, accepting lower returns for long-term public assets is welfare improving.},
address = {M\"{u}nchen},
author = {Reyer Gerlagh and Matti Liski},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {H43; H41; D61; Q54; E21; 330; public investments; cost-benefit analysis; inconsistent preferences; \"{O}ffentliche Investition; Kosten-Nutzen-Analyse; Zeitkonsistenz; Wohlfahrtseffekt; Theorie},
language = {eng},
number = {3330},
publisher = {CESifo},
title = {Public investment as commitment},
type = {CESifo working paper: Public Choice},
url = {http://hdl.handle.net/10419/46418},
year = {2011}
}
