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Public Investment and Different Sources of Uncertainty

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  • M. Menegatti

Abstract

This work 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 have espectively negative, positive and ambiguous effects on the probability of implementation of the project. The effects of covariances are also examined. The work finally shows that uncertainty variability over time affects investment optimal timing and can imply the postposition of investment implementation even if the actual realisation increases the net present value of future utility.

Suggested Citation

  • M. Menegatti, 2003. "Public Investment and Different Sources of Uncertainty," Economics Department Working Papers 2003-EP02, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2003-ep02
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    References listed on IDEAS

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    More about this item

    Keywords

    Public investment; uncertainty; cost-benefit analysis;
    All these keywords.

    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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