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Social Efficiency Indicators of Public Investment: The Case of the Far Eastern Regions

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  • Artyom Gennadyevich Isaev

    (Economic Research Institute FEB RAS)

Abstract

The article provides estimates of the social discount rate and regional welfare weights for the Russian Far East territories. The key parameter for their calculations is the elasticity of the marginal utility of consumption, estimated for the Russian Federation as a whole on the basis of the consumer demand function for food products. It’s revealed that for different territories should be applied different social discount rates for to assess the social effects of projects with state participation. The reason is that territories differ in the quality of life, which can be traced through interregional differences in the level and dynamic of the domestic consumer market as well as the size and structure of household income and expenditure. The social discount rate is sensitive to the future annual growth rate of household consumption in the region. If we take the actual average annual rates for 2000–2018 as forecast values, the Sakhalin Oblast has the highest social discount rate (12 per cent), and the Chukotka Autonomous Okrug has the lowest rate (7.6 per cent). Regional welfare weights show how the regions of the Far East are ranked according to the degree of impact of public investment on marginal changes in the welfare of their households. Thus, the lowest marginal increase in welfare in the Far Eastern Federal District will be observed in the Sakhalin Region, followed by the Khabarovsk Territory. From the social efficiency point this casts doubt on the choice of these regions as priority locations for large-scale public projects. On the other hand the largest effect of public projects for the improving of welfare will be observed in the Jewish Autonomous Oblast and the Zabaikalsky Krai. These regions are characterized by the highest values of regional welfare weights in the Far East for 2018, and consequently the highest marginal welfare growth for households due to public investment. It is worth noting that in 2010 the Chukotka Autonomous Okrug and Kamchatsky Krai were characterized by the highest values of the regional welfare weights in the Far East. By 2018 these two regions significantly improved their positions. Despite the fact that the regional welfare weights for most of the Far Eastern regions decreased significantly, for the Jewish Autonomous Oblast and the Zabaikalsky Krai this decrease was minimal (2 per cent and 5 per cent respectively)

Suggested Citation

  • Artyom Gennadyevich Isaev, 2020. "Social Efficiency Indicators of Public Investment: The Case of the Far Eastern Regions," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 4, pages 23-43.
    • Handle: RePEc:far:spaeco:y:2020:i:4:p:23-43
    DOI: https://dx.doi.org/10.14530/se.2020.4.023-043
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    References listed on IDEAS

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    1. David J. Evans & Erhun Kula, 2011. "Social Discount Rates and Welfare Weights for Public Investment Decisions under Budgetary Restrictions: The Case of Cyprus," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 73-107, March.
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    4. David J. Evans, 2005. "The elasticity of marginal utility of consumption: estimates for 20 OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 197-224, June.
    5. Kula, E., 2002. "Regional Welfare Weights in Investment Appraisal - The Case of India," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 32(1), pages 1-16.
    6. Svetlana Naiden & Anna Belousova, 2018. "Methodological Tools to Assess the Population Welfare: Interregional Comparison," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 53-68.
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    Cited by:

    1. Goryunov, Alexander & Ageshina, Elena & Lavrentev, Igor & Peretyatko, Polina, 2023. "Estimating the effect of Russia’s development policy in the Far Eastern region: The synthetic control approach," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 72, pages 58-72.

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    More about this item

    Keywords

    household welfare; social discount rate; regional wealth weights; public investment; region; Far Eastern Federal District;
    All these keywords.

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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