Optimizing Finance for Development

36 Pages Posted: 30 Jan 2018

Date Written: January 29, 2018

Abstract

The World Bank Group recently adopted the "cascade framework" to "maximize finance for development." The cascade recommends that reforms be tried first, followed by subsidies, and then public investments. To understand the economics of the cascade, this paper presents a model where reforms, subsidies, and public investments can be used to fill the investment gap, and computes the welfare associated with their different sequencing. The cascade is optimal when reforms increase efficiency at no cost. When they are costly, if policies can be project specific, their sequencing does not matter; if not, the cascade can be optimal if agents are myopic, but not if they are forward-looking. Tensions may thus arise between maximizing private financing and optimizing financing for development.

Keywords: Private Sector Economics, Private Sector Development Law, Marketing, Public Finance Decentralization and Poverty Reduction, Public Sector Economics, Technology Industry, Technology Innovation

Suggested Citation

Cordella, Tito, Optimizing Finance for Development (January 29, 2018). World Bank Policy Research Working Paper No. 8320, Available at SSRN: https://ssrn.com/abstract=3113002

Tito Cordella (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0043 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
149
Abstract Views
620
rank
243,414
PlumX Metrics