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Public Investment under Different Sources of Uncertainty

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  • Mario Menegatti

    (Università di Parma)

Abstract

This paper examines in a unified framework the effects on public investment decisions of different sources of uncertainty and the consequences of uncertainty variability over time. The analysis shows that uncertainty about investment benefits, future consumption and input costs has respectively negative, positive and ambiguous effects on the probability of implementing a project. When uncertainty variability over time is allowed, a rule is found to determine the optimal investment decision both when the path of uncertainty is completely known and when it is just presumed.

Suggested Citation

  • Mario Menegatti, 2006. "Public Investment under Different Sources of Uncertainty," Rivista di Politica Economica, SIPI Spa, vol. 96(2), pages 247-276, March-Apr.
    • Handle: RePEc:rpo:ripoec:v:96:y:2006:i:2:p:247-276
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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