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The Cost-Benefit Analysis of Government Loams

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  • Robert J. Brent

    (Fordham University)

Abstract

A neglected area of cost-benefit theory is the evaluation of federal government loans Abstract to finance private investment. This article builds on a model by Feldstein (1973) which disaggregated public investment decisions into two parts; one is the expenditure on the good to be purchased by the loan, and the other is the loan itself. The main new result is that distributional considerations can be divorced from economic efficiency in making the first (expenditure) decision. Distributional factors are used to help determine the second (financing) decision. The two-decision framework is applied to FmHA loans made in New York State.

Suggested Citation

  • Robert J. Brent, 1991. "The Cost-Benefit Analysis of Government Loams," Public Finance Review, , vol. 19(1), pages 43-66, January.
    • Handle: RePEc:sae:pubfin:v:19:y:1991:i:1:p:43-66
    DOI: 10.1177/109114219101900103
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    References listed on IDEAS

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    1. Bradford, David F, 1975. "Constraints on Government Investment Opportunities and the Choice of Discount Rate," American Economic Review, American Economic Association, vol. 65(5), pages 887-899, December.
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    Cited by:

    1. Camino Blasco, David & Cardone Riportella, Clara, 1998. "The assessment of credit guarantee schemes for SME's: valuation and cost," DEE - Working Papers. Business Economics. WB 6535, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    2. Samuel Mensah, 1996. "The Valuation of Government Loan Guarantees: a Theoretical and Empirical Perspective," Public Finance Review, , vol. 24(2), pages 263-281, April.

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